Meeting of the Parliament [Draft]

Meeting date: Thursday, May 11, 2023

Official Report 1007KB pdf

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Charities (Regulation and Administration) (Scotland) Bill: Stage 1

The next item of business is a debate on motion S6M-08870, in the name of Shirley-Anne Somerville, on the Charities (Regulation and Administration) (Scotland) Bill at stage 1. I ask members who wish to speak in the debate to press their request-to-speak buttons.

14:57  

I am pleased to open the debate on the general principles of the Charities (Regulation and Administration) (Scotland) Bill. The bill was delayed due to the pandemic, so I am glad that we are now able to progress it, here today.

I thank the Social Justice and Social Security Committee for its thoughtful consideration of the bill and for its stage 1 report, which expresses support for the bill’s general principles. I also thank all the stakeholders who have taken the time to express their views, through oral and written evidence to the committee and through discussions with my officials. I am also grateful to the Office of the Scottish Charity Regulator—OSCR—for its valuable contributions on the bill.

As, I am sure, everyone in the chamber will agree, charities are crucial parts of our society and our communities. It is therefore imperative that we have in place the right regulatory framework to ensure that we can continue to support our charity sector and maintain public trust in how charities operate.

The Covid-19 pandemic brought into sharp relief the importance of charities across Scotland and the vital services that they provide on the ground. Charities are widely supported by the public: trust in them and in what they deliver is high, and we want to keep it that way.

The Charities and Trustee Investment (Scotland) Act 2005 is now more than 17 years old, and the charity sector has changed significantly in that time. That is why we are aiming to strengthen and improve charity regulation through updating the 2005 act. I am pleased that charities have voiced their support for the bill and its principles, which will increase transparency of charities and proportionately extend OSCR’s powers.

It is encouraging to see that the committee supports all the provisions in the bill—in particular, provisions on information about charity trustees and provisions on charity accounts, both of which will increase transparency and will, in turn, strengthen and enhance public trust and confidence in the Scottish charity sector. The stage 1 report sets out positive conclusions and constructive recommendations that my officials can take forward.

I will now talk about the specifics of the bill. The overall aim is to strengthen and update the existing framework rather than to revisit the fundamental principles of the 2005 act. The bill is built around proposals that were put forward by OSCR, based on its operational experience since the 2005 act came into force.

Further to that, following engagement with OSCR and the Law Society of Scotland, the record of charity mergers at section 12 is proposed, which will improve access to legacy income for many charities. A list of minor or technical amendments to the 2005 act has also been added.

The Scottish Government consulted in 2019 and 2021 on the proposals that OSCR put forward, and more than 400 written responses were received, in total. Both consultations showed strong support for the proposals, and showed that stakeholders were keen to see changes being brought forward.

The bill covers a range of provisions that are designed to enhance the existing framework, each of which falls under one of the three primary aims. The first aim is to increase transparency and accountability in charities by improving public access to information on charities’ operations. The bill requires OSCR to publish the accounts of all charities and to include the names of charity trustees on the Scottish charity register. It will enable OSCR to maintain a schedule of charity trustee details for its own internal use and to provide a publicly searchable record of the small number of individuals who have been removed from the office of trustee by the courts. The stage 1 report acknowledges the balance that the bill provides between the overarching need for transparency and safeguarding of individuals’ safety and security.

The second aim is to provide stronger powers for OSCR, including the power to issue positive directions to help charities to address regulatory issues.

For the record, I am supportive of the general principles of the bill. We all want good regulation and improved openness, accountability and transparency in our charities. We also need to ensure that charities are well served by their regulator, OSCR.

I ask the cabinet secretary this, however: who regulates the regulator? If a charity feels that it has not been treated fairly or not been communicated with well, who can it go to for adjudication during the process of interacting with OSCR?

Gordon MacDonald has raised a very important point. There is a complaints procedure within OSCR, and if an individual or charity remains dissatisfied after that process, they can make further moves through the Scottish Public Services Ombudsman. If there is concern about the role of the regulator, that can, if people desire it, be looked at as part of the wider reform work on charity law that will come.

I move on to the second aim, which is to give stronger powers to OSCR. The bill gives OSCR a new power to issue positive directions to charities, in addition to its existing powers to issue preventative directions. It will also allow OSCR, where necessary, to conduct inquiries on former charities and their trustees. OSCR’s powers and duties will also be enhanced by enabling OSCR to remove a charity from the register if it fails to provide accounts or to respond to communications.

The bill also contains a new provision that requires OSCR to refuse to enter an applicant charity on the register if OSCR considers that it would not be appropriate to regulate the applicant because it has no connection, or only a negligible connection, to Scotland.

The bill empowers OSCR to appoint interim trustees to a charity in certain circumstances—for example, when the charity has no trustees or the existing trustees cannot be found.

Furthermore, the bill makes some adjustments to OSCR’s processes for gathering information in connection with inquiries, in order to make them more streamlined and efficient.

I am grateful to the committee for its support for the new powers and for the questions that it has posed about the practicalities of the appointment of interim trustees. I understand the committee’s desire for more information on how OSCR envisages that that new power will work, especially in the light of difficulties that are faced by many charities in recruitment and retention of trustees. I understand that OSCR intends to write directly to the committee on that point and on other areas, including OSCR’s plans for communicating the changes to charities and providing guidance, as requested in the stage 1 report.

The third aim of the bill is to bring Scottish charity law up to date with some key aspects of charity regulation in England, Wales and Northern Ireland, in order to enhance public trust in charities and further protect charitable assets. That will be achieved through updates to the criteria for disqualification of charity trustees and through the extension of disqualification to individuals who are employed in charities who exercise specified senior management functions. I am glad that the committee agreed that it is sensible for Scotland to align the trustee disqualification criteria with criteria in the rest of the United Kingdom to enhance the sector’s ability to carry out due diligence.

I also appreciate the committee raising the important issue of trustee and senior management diversity in the charity sector. I share the committee’s view that people who have lived experience can, and should, bring valuable and often unique contributions to charity boards.

The bill enhances protection for charitable assets through the creation of a record of charity mergers and the new provision on redirecting legacies when charities have merged. The stage 1 report asks the Scottish Government to consider whether other types of gifts to charities can be included in the record of charity mergers. The Government is assessing that possibility.

One aspect of that that we have not necessarily had clarity on at stage 1 is what happens to lifetime gifts when a charity goes through a merger. What work is the Government doing ahead of stage 2 to provide that clarity?

That is the type of work that I referred to in the remarks that I made just before that intervention. I am very keen to look at the matter and am happy to work with members of the committee and other members across the chamber to see what more can be done in advance of stage 2. I am happy to take that forward with Mr Briggs, should he wish to do so.

The bill makes practical improvements to and updates existing charity regulation and the role of OSCR. That is what we consulted on pre-pandemic and why we are taking it forward. I know that stakeholders want long-term changes to charity regulation, but I want to make it clear that that is not the purpose of the bill, which is intended to sustain effective and supportive regulation of charities during these challenging times.

However, as I mentioned in my response to Gordon MacDonald, I believe that there is a need for a broader review of the future of charity regulation, which is why I am pleased to recommit to a wider review following the passage of the bill. The stage 1 report helpfully sets out stakeholders’ views on areas for consideration as part of that wider review, and we will ensure that we engage with the charity sector further on the scope of that review and how it could be shaped.

This is a technical and very focused bill that provides improvement for the charity sector by strengthening and enhancing the existing regulatory framework. I hope, therefore, that Parliament will agree to it.

I hereby move,

That the Parliament agrees to the general principles of the Charities (Regulation and Administration) (Scotland) Bill.

I call Collette Stevenson to speak on behalf of the Social Justice and Social Security Committee.

15:07  

I am delighted to speak on behalf of the Social Justice and Social Security Committee as its new convener. Before I get into the substance of the committee’s scrutiny work, I thank the outgoing convener and deputy convener, Natalie Don and Emma Roddick, as well as the wider committee, for their diligent scrutiny of the Charities (Regulation and Administration) (Scotland) Bill. I note that, although the bill is small in size, that belies the technical complexities that the committee had to grapple with.

The bill aims to update and strengthen the Charities and Trustee Investment (Scotland) Act 2005 and provides an opportunity to improve the regulation of charities, as well as to reinforce public confidence in the sector as a whole. As Children’s Hospices Across Scotland told us,

“Charities are in a privileged position with regard to handling donations from the public…Those are things in relation to which public accountability is important.”—[Official Report, Social Justice and Social Security Committee, 2 March 2023; c 30.]

The committee sought a breadth of views including from the third sector and designated religious charities, as well as from law, accountancy and audit professionals. The committee is extremely grateful to all those who engaged with us.

One of the objectives of the bill is to bring Scottish charity legislation up to date with key aspects of regulation in England, Wales and Northern Ireland. Technical changes that the bill will bring about will help regulation in Scotland to keep pace with that of other jurisdictions.

However, evidence was gathered demonstrating that there is a desire to go further and for a wider review of charity law. We understand that the Scottish Government has provided a commitment on that, which we welcome. It has been almost two decades since the 2005 legislation was enacted, and the use of digital systems means that the world and the way in which we work have changed significantly.

Witnesses made it clear that it is essential that any review is independent and, crucially, carried out in consultation with a wide range of people and organisations. We strongly advocate that the Scottish Government should engage directly and early with the third sector and should make specific efforts to reach those small and medium organisations.

In its evidence, the Charity Law Association explained that

“One of the joys of the Scottish charity system is that we have sometimes been slightly ahead of the game”,

but we are now

“slightly behind the curve”.—[Official Report, Social Justice and Social Security Committee, 9 March 2023; c 31-32.]

We hope that that wider review will help to return Scotland to the forefront.

Before turning to the detail of the provisions, I emphasise that, although the committee supports the general principles of the bill, we received a clear message from the charitable sector that more information is required. The Scottish Government and OSCR must work together to ensure that the sector is provided with that reassurance and support.

One area in need of clarification is the disqualification of potential trustees. It quickly became clear that there is significant confusion regarding undischarged bankruptcy as a criterion for disqualification. Several witnesses were specifically concerned that some individuals with relevant lived experience might be barred from becoming trustees and that that might become more of an issue because the cost of living crisis could increase instances of bankruptcy.

Although OSCR advised the committee that personal bankruptcy is an existing criterion for disqualification that has been in place since the 2005 act was passed, we felt that the regulator should clarify that position to the sector. The committee is concerned that it has taken the introduction of the bill for the lack of awareness regarding that regulation to come to light. Now that new legislation is coming, OSCR must ensure that all existing and new regulations governing charities are well understood by those who work in them. Full transparency and accountability can only be achieved if the individuals working in the sector know what is expected of them.

Although those who might be subject to disqualification can apply for a waiver, there is also uncertainty about how the waiver process would work. Default disqualification was a particular concern. It was thought that, in addition to the waiver process being potentially off-putting to prospective trustees, it could disproportionately affect those from marginalised backgrounds.

Charities deal with public money raised in good faith, so it is imperative that this element of the legislation remains robust. However, organisations and potential trustees must have the information and support that they need to ensure that the waiver process is straightforward and that individuals are given the opportunity to be judged fairly. The Scottish Government and OSCR should ensure that the process is well understood and that any associated administration is straightforward.

I am not a member of the committee, but I was interested to read the report. That issue was raised with the cabinet secretary and one of her answers was that most disqualifications are time limited. Was the committee satisfied with that answer?

We could look at that at stage 2. I believe that the barring period is 12 months at the moment.

There were questions about the appointment by OSCR of interim trustees. Although the bill provides the regulator with the power to do that, the evidence highlighted challenges in trustee recruitment. We consider that it might not be easy for OSCR to find and appoint individuals who are willing to act on a temporary basis. Our report seeks further information about how OSCR expects to be able to recruit interim trustees and about how often it anticipates that power being used. For example, we would like to know if there would be a Scotland-wide panel of trustees for OSCR to draw from.

The final provision that I will discuss relates to the provision for OSCR to issue positive directions to charities following inquiries into those charities when concerns have been raised. Although that was broadly supported, our evidence showed that the sector needs greater clarity about how that will work in practice. For example, there was a spectrum of opinion regarding exemptions from positive directions for designated religious charities. The committee recommends that the Scottish Government covers that issue as part of the wider review.

It was clear throughout our scrutiny that charities need more information about what will be expected of them, and particularly about potential administrative and financial burdens. It is vital that any uncertainty is addressed. That is why we asked the Scottish Government to set out in advance of stage 2 its plans for commencement, in order to provide an assurance that the expected timeframe will allow enough time for communication with organisations to help them to prepare. The committee is pleased that the Scottish Government has since confirmed the expected timeframe in writing, and we thank the cabinet secretary for that. We also welcome the Scottish Government’s recognition of the importance of communication with the sector.

In order for charities to continue to add value, we must ensure that they are properly regulated and supported. Although the committee is pleased that a wider review is forthcoming, we recognise the need for the Charities (Regulation and Administration) (Scotland) Bill to update important regulatory elements of existing legislation now. The committee therefore supports the general principles of the bill and commends them to the Scottish Parliament.

15:16  

I welcome the Charities (Regulation and Administration) (Scotland) Bill and confirm that those of us on this side of the chamber will vote for it at decision time today. As the cabinet secretary mentioned, it is a fairly non-controversial bill, which is probably just as well because, since stage 1, we have had a new cabinet secretary, a new convener and a new deputy convener and we have lost five members of the committee. [Laughter.] If it had been controversial, heaven knows what would have happened. However, it is a welcome bill, and I hope that it will bring some clarity with regard to how charity law is developing.

Like others, I thank those who gave evidence to the committee at stage 1, including the third sector bodies and other bodies with an interest in the matter. Like the cabinet secretary, we all acknowledge, I am sure, the importance of the third sector and of charities in Scotland. In our local communities, many of us see charities providing care and help to the most vulnerable, and many of us are aware of the larger charities that work across Scotland.

As someone who worked in the third sector briefly and as someone who has been a trustee of a number of charities, I know how difficult it sometimes is to recruit people into such positions to ensure that there is good governance. I hope that the bill—or the act, in due course—will help in that regard.

To critique the bill slightly, I suppose that what is most disappointing is not what is in it, but what is not in it. That came through clearly in the evidence that we heard, particularly from the third sector. There was an opportunity to have a wide-ranging review of charity law rather than the technical bill that we have before us today, but that has not happened. There is disappointment in that regard.

I understand that the minister has said again today that there will be further consultation once the bill has become an act, but I ask her to put on the record in her closing remarks that there will be no further bill on the matter in the current session of Parliament and that any change in charity law will happen in the next session.

I am grateful to the member for giving me the opportunity to clarify that. There is no intention to have a further bill, so a piece of primary legislation is not possible, but there are a number of pieces of secondary legislation that could be changed. That is something that we are happy to look at in the scope of the wider review.

I thank the cabinet secretary for that clarification.

As our new convener mentioned—I welcome her to her role—another thing that came out in the evidence was the third sector’s need for clarification of how charity law works. There seemed to be quite a lot of misunderstanding or concern about that, so that needs to be clarified, as does some of how the bill will work in practice. I welcome the letter that we have received from the cabinet secretary, and I look forward to receiving the correspondence from OSCR. I gently point out both to OSCR and to the Scottish Government that we are working to quite a tight timescale for stage 2 amendments. I understand that that stage will happen early next month, which means that the amendments will have to be lodged this month—and we are already nearly half way through this month. I therefore hope that we will receive early correspondence from those bodies so that appropriate discussions and amendments can be brought forward in order to improve the bill.

In the time that is left to me, I will pick up on three areas of the bill at which we may need to look in a wee bit more depth. Sections 4 and 7 deal with disqualification from being a trustee. Again, there seems to be a bit of a lack of understanding of what that means in practice. I hope that OSCR will seek to clarify that as soon as possible.

Interestingly, the Law Society of Scotland picked up that the regulations that will follow on from the act will be vitally important for how arrangements work in practice. Although I am sure that the Scottish Government will do this, I seek reassurance that there will be a full consultation with the third sector on those regulations before they are brought to the Parliament for approval.

Perhaps we also need to look at protected trust deeds, which some individuals use when they face bankruptcy. I understand that, if someone is declared bankrupt, that lasts for only one calendar year, but that there is a longer period for protected trust deeds. Some people may thus be disbarred from being a trustee for that longer period of time. In the evidence, it became clear that we need a wider group of individuals to become trustees—a wider range, from other parts of society, who have perhaps not done so in the past—and that the possibility of disqualification may put people off.

The second area that I want to probe a little is interim trustees, which section 8 deals with. The question is, where will they come from? Certainly, the charities that I speak to in Lothian are desperate for people to become trustees. Again, maybe some clarification is needed. Will the Scottish Government or OSCR set up a panel of individuals that they can call on?

Some people might not be able to commit to a long term with a charity but might be willing to help out for a few months.

That is an interesting concept. I would quite like it to be tested, to see if it is right, but it may well be something that we can look at.

There was a slight confusion—and perhaps it was my ignorance rather than anyone else’s—about what happens if a charity has an interim trustee appointed to it that it does not want. My reading of the bill is that there is no right of appeal for that, and that the only way forward would be for those trustees who may not have been functioning but who are still around to take the matter to judicial review. That seems to be very expensive and to take up a lot of resources and time. I wonder whether the Government would write to the committee to clarify why there is no right of appeal if the charity does not like the interim trustees who have been appointed. Such appointments are likely to happen fairly rarely, but, when they do, that will probably be because there has been some kind of conflict or because something has gone wrong.

Finally, and very briefly, I will pick up on a point that was made by my colleague Miles Briggs about lifetime gifts and legacies, which are covered by section 12 of the bill. According to what the Law Society of Scotland said about lifetime gifts in its submission, if I put a lifetime gift to a charity in my will and the charity merges with another charity, it would be for me, as the person who wrote the will, to have my will altered. If that did not happen, the money would not go to the new merged charity. That seems to put quite a lot of onus on people to keep up to date with what is happening in charity law. I welcome the cabinet secretary’s remarks that she will look at that. We need to make that a bit cleaner and tighter at stages 2 and 3.

I again welcome the bill and look forward to improving it over stages 2 and 3.

I call Paul O’Kane for a generous six minutes.

15:25  

I am pleased to lead this debate on behalf of the Scottish Labour Party. At the outset, I refer members to my entry in the register of members’ interests, as I currently serve as chair of the trustees of the Neilston War Memorial Association.

I take the opportunity to thank the Social Justice and Social Security Committee for its hard work in scrutinising the bill. I pay tribute to all the former members of the committee. As Jeremy Balfour rightly recognised, there are many newbies participating in the debate who have inherited this important piece of work, but we are nonetheless keen to make our contribution as the bill moves through its stages. I know that Pam Duncan-Glancy, a former member of the committee, worked very hard on the bill during stage 1, including through the stage 1 report process.

From the outset, I want to be clear in stating that Scottish Labour supports the bill and believes that it is critical that charities operate with transparency and accountability. We recognise that the bill will update Scottish charity legislation by aligning it with key tenets of the regulations that govern charities in England, Wales and Northern Ireland.

In common with what we have heard from other opening speakers, I note that it is evident that some aspects of the bill should be refined and clarified as we move to stages 2 and 3. In particular, we should consider how the new regulations will impact on and interact with different charities in different ways. For example, it is critical that we do not overburden charities with regulation to such a degree that it limits their resources and stifles their ability to perform their primary function of delivering support for the causes that they champion and that are supported widely by the public in a variety of ways.

On regulation, it is important that, at stage 2, there is greater focus on exploring the remit and resources of OSCR, the independent regulator and registrar for Scotland’s charities, to ensure that there is a proportionate increase in funding, if required, to allow OSCR to carry out its responsibilities effectively. I appreciate that we have already had the beginning of a discussion about the wider piece of work that is required in reviewing the charity sector in Scotland and the support for it.

It is clear that the wider context is important. I have highlighted in the chamber the significant financial pressures that third sector organisations across Scotland face. We know that the reality is that the majority of charities are small local organisations, with fewer than 10 per cent of registered charities in Scotland having more than 20 employees. Very often, those organisations are firmly rooted in their community and are reliant on the tireless generosity and passion of volunteers to deliver vital support for those who need it.

In my contribution to the debate on the social isolation and loneliness strategy last week, I mentioned that, in the context of the cost of living crisis, third sector organisations are being asked to deliver more with less resource. Although this is a technical bill, we need to recognise that there is a wider debate about the third sector as a vital national resource. The expertise of those in the sector is unrivalled, and the work that they do is invaluable.

As part of that wider review, the Government will want to consider the continuing conversation about long-term funding and to move beyond year-to-year funding for the third sector. It will also want to look at the availability of more core funding and at supporting representative bodies such as the Scottish Council for Voluntary Organisations to drive forward a lot of the changes and to support charities in growing their capacity so that they can seamlessly move with those changes. Our third sector needs greater stability rather than being limited by continuous cycles of short-term funding and different interventions and regulation at different stages.

Indeed, during the consultation process on the bill, several third sector organisations highlighted that they were struggling to respond as they simply did not have the capacity to draft meaningful responses within the required timescales. That in itself tells the story of the current picture for many charities. Only a tiny fraction of the 25,000 registered charities in Scotland submitted responses. In those responses, questions were raised about the impact of the legislation. Such issues—for example, the creation of a register of trustees—have already been articulated in the debate. Many bodies, including the Faculty of Advocates, have highlighted that charities already struggle to recruit trustees with the requisite skills, passion and experience and who are prepared to give the necessary time commitment.

According to the bill, prospective trustees will be able to apply to OSCR to preserve their anonymity. Although that provision protects the accountability and transparency of charities, it is important to recognise that, for many people, it will create additional barriers to becoming trustees and engaging with charities. That is particularly the case for those who are going through a period of rehabilitation and rebuilding their lives after criminal convictions or prison sentences. We therefore need to be mindful of the balance between protecting charities, and the money that people donate to them, and giving everyone a fair crack of the whip.

Does the member accept that, from the point of view of trusting a charity, for someone who is a potential donor or who just wants to find out about a charity, it is a bit strange to look at its report and find that no names of trustees are mentioned?

Absolutely—I take John Mason’s point. We must find ways to share such information appropriately. The point that I am making is that there is a danger of creating too high a barrier for people who are going through the process of trying to improve their lives after a variety of situations. We need to strike that balance, because people will want to have confidence and to know who is in control of and governing a charity, but we need to be careful about how we go about that and what the thresholds are for a person to remain anonymous.

I reiterate Scottish Labour’s support for the bill. However, we call on the Government to adopt an open, positive approach and to work with all parties to strengthen the bill and iron out the concerns that charities have raised. Moreover, I urge the cabinet secretary to engage further with charities on the work to which she has committed, to ensure that the bill carries the confidence of the sector and, more widely, so that we can have a conversation about how we strengthen and support charities across Scotland.

We move to the open debate. I advise members that there is quite a bit of time in hand, should they be inclined to take or make interventions or perhaps to expand on their original thoughts on the matter.

15:32  

I will not continue to speak this slowly, Deputy Presiding Officer. [Laughter.]

I should highlight that I am a relatively new member of the Social Justice and Social Security Committee, as Jeremy Balfour referred to earlier. I, too, take this opportunity to commend the committee’s clerks, its previous members who led on this work and, of course, the stakeholders who provided invaluable evidence.

The bill was introduced in November 2022 and has undergone two consultations, which attracted more than 400 written responses. It aims to

“strengthen and update the current legislative framework for charities registered in Scotland”.

It will do so by increasing transparency—for example, by creating a register of trustees and giving additional powers to the Office of the Scottish Charity Regulator, including the ability to investigate charities and their trustees.

I support the general principles of the bill, which I believe will ensure robust regulation as well as improved openness, accountability and transparency for our charities.

The charitable sector provides important and, in some cases, essential support across communities and to individuals. From local scout groups to training providers and local playgroups, its reach is far and varied, with every community in Scotland containing at least one of the 25,000 charities currently operating in this country.

In my Edinburgh Pentlands constituency, there are 263 registered charities, on which many people in my area depend for support. However, one in eight of the same charities fails to submit an annual return and is currently flagged as being in default. Therefore, it is right that we reconsider the legislation that was passed in 2005 in order to ensure that it is fit for purpose.

Submissions to the consultation recognised that the charity sector has changed and grown significantly since 2005, with many citing the change in the public’s expectations of charities. In particular, there was a recognition that organisations that are funded by local government and national Government agencies are now subject to

“more checks and balances than ever before”.

A common theme among respondents was the need for greater transparency and accountability to maintain public trust in the sector. The pandemic had a profound impact on the sector—I am certain that members across the chamber will be all too aware of the pressure on such organisations throughout that time. Some of the respondents believe that the situation underlined the need for greater transparency as well as the need for wider reform, given the huge changes that happened in response to the challenges that the pandemic posed. Those who submitted evidence highlighted that, in the past three years following Covid-19, there has been more change in the sector than there has been since the 2005 act was implemented.

In addition, throughout the consultation process, which focused on potential improvements to the statutory charity regulation framework, there were calls for a more fundamental review of the charitable sector, and I am pleased that the cabinet secretary indicated her intention to consult further with the sector on that point following the passage of the bill.

The bill’s general provisions reflect and, I believe, strengthen the proposals that OSCR made in 2018. As I indicated, the bill proposes to give OSCR wider powers to investigate charities and charity trustees; to amend the rules on who can be a charity trustee or a senior officer in a charity; to increase the information that OSCR holds about charity trustees; to update the information that needs to be included on the Scottish charity register; and to create a record of charities that have merged.

It is clear from the majority of charitable organisations that responded that the proposed change to the legislation is a welcome move by the Scottish Government. Overall, there was agreement, in the evidence that was gathered, that the bill will lead to greater transparency in charity regulation.

Some concerns were raised that the proposal will be effective in increasing transparency and protecting the Scottish public only if OSCR is appropriately resourced and able to implement its new powers. I am pleased that the cabinet secretary has considered that point and given assurances that the additional obligations, while significant, will not be too burdensome and that the Government will work with OSCR to ensure that it is supported.

Many of the responses recognised that the increase in OSCR’s powers to investigate current and former charities, as well as the broader coverage of the right to disqualify trustees, will have a positive impact on protecting the public. In addition, many respondents believed that strengthening OSCR’s powers will act as a deterrent against maladministration, which will go some way in offering assurances to the general public about the management of funds.

Many respondents supported the creation of a publicly searchable record of trustees, which they believed would increase transparency and protect the public against “rogue trustees” who would previously have been able to avoid scrutiny.

Many smaller charities understandably had concerns about whether any changes to the legislation would result in additional costs to them, particularly as they are still in the throes of increases in the cost of living, which are undoubtedly having a significant impact on their ability to operate. I welcome the assurances from the Scottish Government, which are set out in the financial memorandum, that although the changes might result in some additional administrative time, there should not be any additional costs.

Finally, I welcome the cabinet secretary’s earlier commitment to reviewing the regulation of OSCR in any future wider review of charitable law following the passage of the bill. That is fundamental and will go some way towards ensuring that charitable organisations are treated fairly in any dispute.

I call Douglas Lumsden, for a generous six minutes.

15:39  

I extend my thanks to the members and clerks of the Social Justice and Social Security Committee for producing the report, which is not only helpful but clearly shows the views of our third sector throughout its findings and recommendations.

We all agree that our third sector is the lifeblood of so many of our communities. They provide on-the-ground services that Governments struggle to provide, and they meet the needs of residents that large-scale organisations have difficulties in tackling. Whether through befriending programmes for the lonely, rehabilitation for people who are affected by addiction or warm hubs for those who are struggling with household bills, the small-scale local actions of our voluntary organisations are central to wellbeing and community cohesion throughout Scotland.

I want to take the opportunity to thank the incredible charities of the north-east. There are too many to name, but I highlight Camphill School Aberdeen, Big Noise Torry and the men’s shed network. Those are three fantastic charities that, through their work with young people and adults in the north-east, provide a vital service and resource in our community. They deserve our thanks and our support.

Reform of charity legislation is long overdue, and I join colleagues in welcoming the Charities (Regulation and Administration) (Scotland) Bill. It goes some way to developing a clearer framework for charities and their trustees in Scotland, and seeks to encourage the use of technology and to build greater transparency into the system so that our third sector has greater accountability and access to support and help.

I also welcome the consultation that took place with the third sector in relation to the drafting of the bill. It has been well thought through and the third sector has engaged widely. Although only 12 of the 32 third sector interfaces responded to the consultation, I recognise that it took place during the pandemic, when many organisations had to put resources elsewhere.

I support the Social Justice and Social Security Committee’s recommendation that the Scottish Government should look again at how it engages with the third sector, and I ask the cabinet secretary to produce a plan for how that might be done in future consultations.

I note that many of the organisations that responded to the consultation had concerns about the place of people with lived experience as trustees under the new legislation, and I welcome the committee’s focus on that in its report. It is clear that the committee thought carefully about the issue and considered the implications for boards and the recruitment of trustees.

The committee calls for much greater clarity to be provided on the disqualification criteria around bankruptcy and asks the Government to ensure that the waiver process is well understood by the sector. As the convener said, it is clear that OSCR will have some work to do to ensure that that is in place once the bill has been passed.

As anyone who is involved in charities in Scotland knows, the recruitment of trustees is challenging. Finding the right people to do the right jobs is difficult; the difficulty of doing so in our more rural communities, in particular, has been highlighted. Therefore, it is important that the bill does not dissuade anyone who is suitable from becoming a charity trustee and does not make the process cumbersome and, in so doing, put people off.

More clarity is also needed around the interim trustee process and what that will mean in practice, and I look forward to the committee considering that during the passage of the bill.

Among the charities that responded to the consultation, there was a great deal of concern about the level of additional administrative burden that the bill might place on small charities. As we know, the majority of charities are small, and most are wholly staffed by volunteers. It is vital that any additional administrative responsibilities do not negatively impact on their ability to deliver services in our communities. The committee’s report refers to the important point that Alzheimer Scotland made about the administrative and financial burden. Any additional burdens that the bill imposes should not put anyone off becoming a volunteer treasurer or administrator for a charity.

That is a key concern that needs to be addressed as the bill progresses. The Government and OSCR need to provide clear guidance, and information technology solutions need to be put in place that make it easier rather than harder for charities to report.

Although this issue is not included in the bill, it is worth highlighting the section in annex A of the report around the auditing threshold for charities. I understand that the income threshold for charities in Scotland is slightly lower than that elsewhere in the UK, but I ask the cabinet secretary to listen to the calls from the third sector on the issue. I note that, according to the summary note on the informal consultation that was held on 1 March,

“Anecdotally there is a lack of availability of auditors.”

I am sure that front-bench members of the Scottish National Party would agree with that, and have recent experience of it.

I support the principles of the bill, and I welcome the reform of charity legislation. More clarity is needed on some areas, and I echo the views of the third sector in its calls for clearer guidance in certain areas. I am genuinely pleased that the Scottish Government has listened to the concerns of the sector and has worked with it to develop the bill. I hope that that can be a model for future legislation.

15:45  

Charities play a vital role in supporting all our communities, particularly those that are in greatest need. The pandemic and the cost of living crisis have continued to highlight how vital the support that charities provide truly is. I see that at first hand with the terrific charities in my Clydebank and Milngavie constituency. I put on record my thanks to all the hard-working charities that support those in need and work to improve our communities.

The bill is an important step that we must take to strengthen the third sector in Scotland. It has been 17 years since legislation concerning charity law in Scotland was passed. It is important that we have listened to charities that have called for the Scottish Government to update and strengthen the current regulations.

It is right that, as a starting point for updating the legislation, the bill is centred on the practical proposals that the Office of the Scottish Charity Regulator put forward. Scotland’s charities raise over £14 billion each year, so it is essential that they are properly regulated. Charities cannot exist without the support of generous donors, and we know that those donors are more likely to support charities when they are confident that those in charge are the right people to ensure that their money is being used responsibly.

At its core, charity is about trust. When individuals become involved with a charity, they give more than just their time and money, and they deserve to know that those who manage their donations and run the charity can be trusted to act in its best interests. The bill will ensure that the public can trust the charities that are most important to them by enhancing transparency and accountability across the sector.

OSCR already does vital work in overseeing the third sector in Scotland. It grants charitable status, monitors compliance and investigates misconduct and much more. However, it is clear that it does not currently have the powers to fulfil its core aim of ensuring transparency. With OSCR’s ability to issue positive directions, publish annual financial accounts for every charity, appoint interim trustees where required for a maximum of 12 months, and ensure that individuals who are disqualified as trustees are known and unable to work in other senior management roles, the bill will ensure that OSCR has the enforcement powers that it needs to meet its core aim of increasing transparency in the sector.

Charities have often benefited from their trustees having lived experience of a specific issue. I am conscious that there will be certain areas in which, due to their nature, trustees must be afforded anonymity—in victim support organisations, for example. Therefore, I am glad that, as the Social Justice and Social Security Committee concluded, the bill’s provisions strike a good balance between greater transparency and providing avenues to protect the identity of trustees where necessary.

What is most important about the proposals in the bill is that they in no way impact on charities’ ability to support those in need. No decisions that we make will mean that any charity will have to sacrifice front-line resources. More than half of all charitable organisations in Scotland have an annual income of under £25,000. It would not take much additional regulatory burden for the vital work that those smaller charities do to be significantly hampered.

With that in mind, I am pleased that the analysis that the Scottish Government conducted found that charities are supportive of the proposals in the bill and that they do not foresee anything other than minor costs. That finding was supported by Citizens Advice Scotland.

It is important that we acknowledge the views of the experts who consulted on the bill. The Law Society of Scotland stated that the proposals are “sensible and proportionate” and that the register of trustees’ names will directly increase transparency. The chair of OSCR believes that the bill will

“increase public trust in Scotland’s 25,000 charities”,

and Citizens Advice Scotland highlighted that the bill will help to improve public confidence in the third sector and ensure that the benefits that charities provide to society are therefore maximised. It is therefore clear to me that there is widespread support for the proposals from those who will be most impacted.

I believe that the bill is an important step that we must take to support the third sector. Charities will continue to receive the donations that they urgently require only if donors have full confidence that their donations are going to support those who need it most. The improvements that the bill will make to transparency in the sector will go a long way towards ensuring that donors continue to have confidence in the charities that they choose to support.

It is clear from the consultation that further work will be required as we continue to strengthen the Scottish charity sector. However, I am a firm supporter of the bill and I believe that it provides the best possible framework to begin comprehensively improving charity regulation in Scotland.

15:50  

Before I begin, I would like to declare an interest: I am chair of the Edinburgh and Lothians Regional Equality Council—ELREC.

The Charities (Regulation and Administration) (Scotland) Bill aims to update the current charity law in Scotland, and Scottish Labour welcomes this much-needed update. As many of my colleagues have already mentioned, the bill will pass more power into the hands of the Scottish charity regulator, OSCR. It will hold charities more accountable for the appointment of trustees and the publication of accounts, and it will increase transparency and accountability in charities by improving public access to information about the daily running of charities.

Those are, of course, welcome improvements, but a more in-depth review is still required. As part of my role as a member of the Social Justice and Social Security Committee, I highlighted those issues to the then cabinet secretary, Shona Robison, who outlined that the implementation of the bill would help to guide a wider review of the charity sector in general. I hope that that is still the case.

I would like to highlight some key issues with the bill. The first concern is that the consultation and engagement process did not go far enough, and many thought that the engagement process was not well advertised.

Zero Tolerance Scotland and the Edinburgh Rape Crisis Centre are examples of organisations that did not have the capacity to interact with the consultation processes in 2019 and 2021. They have expressed the view that the latest and final consultation process was not advertised well enough for them to participate in it. As well as that, smaller charities and organisations were not given an opportunity to make a representation to the call for views. As its chair, I can confirm that ELREC was not made aware of any opportunity to participate in such consultations.

The Scottish Women’s Convention and Children’s Hospices Across Scotland also expressed concern about the publicity around engagement events. They said that it was not wide-reaching enough, and that not all third sector organisations had the opportunity to express their concerns and give feedback.

In addition, some charities felt that they had not had the chance to fully contribute to the bill and that its development was skewed towards the views of OSCR.

I sincerely hope that the wider review of the charity sector that has been promised will seek to avoid those issues.

With regard to smaller third sector organisations, I have been made aware of concerns about some of the bill provisions, specifically the provision on the publication of accounts and implementation of a register of trustees. We welcome the transparency and accountability that the bill will bring, but there is concern about whether it will disproportionately affect smaller third sector organisations.

Foundation Scotland has expressed concern that the administrative burden that will be placed on charities due to the provision may feel disproportionate for smaller charities. The Institute of Chartered Accountants of Scotland expressed concern that smaller charities and third sector organisations are also likely to feel daunted by the implementation of a register of trustees in complying with the requirements and securing disclosure exemptions on the grounds of safety and security.

If implementing the legislation looks as though it will place a greater burden on smaller charities—which were largely left out of the consultation process—I hope that an adjustment period can be introduced to assist the affected organisations. First and foremost, however, I hope that the Scottish Government will be able to provide assurances that the bill will not disproportionately affect smaller third sector organisations.

15:56  

I appreciate the opportunity to take part in the debate. As members will know, I am not currently and have not previously been a member of the Social Justice and Social Security Committee, which is the lead committee for the bill, so I have not been involved in taking evidence or preparing the committee’s report. However, perhaps that has some advantages in that I come to it without many preconceived notions. I highlight that I am a trustee of the Fare Share Trust and have been involved in various charities over the years.

The issue of whether trustees’ names should be in the public domain has been considered by the committee at some length, and it is argued that that requirement will increase transparency and accountability. I note that there has been some concern about that, including from the Faculty of Advocates. I fully accept that there needs to be some right to privacy and agree that home addresses should not be shown. However, it seems to me that the right to privacy must have some limits and should be balanced against other rights and the public’s expectations.

In preparation for the debate, my staff and I were looking at the published reports and accounts of a few Glasgow charities. One charity that I have some concerns about had all the trustees’ names redacted. Apart from the fact that that looks very odd in comparison with a business or housing association report, for example, it presents a real problem for me or any member of the public. One of the reassurances that a concerned person or a potential donor can have when they are looking at a charity is seeing the names of its trustees and gaining reassurance that they are, to some extent, known and trustworthy. Becoming a charity trustee is not to be taken lightly; it carries certain responsibilities. Therefore, I believe that it is important that trustees’ names are published, except in exceptional circumstances.

I will move on to the issue of disqualifying trustees because of bankruptcy. I presume that neither charities, potential donors nor the wider public want trustees to be managing charity finances if they cannot manage their own personal finances. At the same time, the point is correctly made that we want people with lived experience who can bring practical views to the way in which a charity operates. So, once again, there is a balance to be struck.

The then cabinet secretary’s response on that issue to the committee was helpful in that many of the disqualifications are time limited. If someone has made mistakes in the past, or if they got into financial trouble through no fault of their own, they must be given the opportunity to turn their lives around and be afforded another chance. However, it does no harm to have bit of breathing space in that process. Another point that has been made is that someone can have a huge input to a charity without being a trustee. Being a trustee is a responsibility, not a reward. As OSCR says, public trust and confidence is very important.

There is a range of other issues that I will mention in passing. I note that the then cabinet secretary made the point that she felt that all trustees should be treated in the same way. However, I wonder whether that is the case. A trustee for a charity that has an income of £25,000 does not carry the same level of responsibility as a trustee for a charity that has an income of £25 million, surely.

On interim and temporary trustees, some people might be willing to take on such a role if it was time limited and if they would not be making the long-term commitment that comes with being a trustee in normal circumstances. I have to say that I might consider an interim role but not a long-term one—however, that is not an invitation for people to contact me.

I did not really understand the point that information in accounts could be used maliciously against charities. I was not really clear what the committee meant by that.

The lack of availability of auditors was raised by the Institute of Chartered Accountants of Scotland, of which I am a member. Many charities have an income of less than £25,000 and it is worth considering whether any checks on them are needed. Independent examination is an important alternative for medium-sized charities.

The risk of misappropriation increases with income. I would have reservations if the threshold for an audit was raised from £500,000 to £1 million, as ICAS suggests, because a lot can go wrong with an income of £500,000. Risk should be the decisive factor.

To move on to what is not in the bill, I said in my brief submission to the consultation on charity law that we need a more fundamental review of charity law. I am glad to see that a number of organisations said the same thing, including the Law Society of Scotland. Annexe A to the committee’s report touches on the issue.

We have at least three types of charities, which are all very different. First, there is the small local charity that works in the community or perhaps raises funds for a school overseas and is run entirely by volunteers. Secondly, there is a category of much larger charities that do the same kind of work but with many staff and possibly Government funding, such as Oxfam, Barnardo’s and the Scottish Society for the Prevention of Cruelty to Animals.

Finally, there are big organisations such as Glasgow Life, housing associations and universities that are probably not charities in the traditional sense. I have no problem with such bodies getting tax breaks, which they do and which is an incentive to be a charity, and they fulfil charitable purposes—Glasgow Life claims to fulfil at least seven of those purposes. However, I wonder whether we should call a body such as Glasgow Life a charity. That is a bit misleading and it dilutes the positive feeling that many people have about charities. In the long term, maybe we need to look at a new definition of charity.

I am happy to support the bill at stage 1. I hope that it will be followed by more wide-ranging legislation.

I call Maggie Chapman, who joins us remotely.

16:02  

On behalf of the Scottish Greens, I am pleased to contribute to the debate in support of the bill’s general principles. I refer members to my entry in the register of members’ interests—I was previously employed in different roles in the charitable sector and I am a member of some charities.

Charities and the third sector play a vital role in our communities. Such organisations often support us at some of the most difficult or challenging times in our lives. They provide crucial—sometimes life-saving—services for us as individuals, families and communities. They advocate on our behalf when we cannot or might not be able to speak for ourselves. They provide constructive challenge and critique for all levels of government on policy direction and decisions. They build resilience and provide protections across all our communities. Their hard work often goes unseen and is—sadly—often undervalued. Our society would not function without such services and supports and without the often selfless work that many contribute to our collective wellbeing.

It is therefore vital for the regulatory framework in which charities operate to be up to date and to serve charities and wider society as well as possible. As we have heard, charity law has not been significantly amended since the Charities and Trustee Investment (Scotland) Act 2005 was enacted. The bill that we are debating aims to update the charity regulation system by improving transparency and accountability; enhancing public trust by providing greater protection for charity assets and the charity brand through stronger enforcement powers; and improving the efficiency of OSCR’s operations.

As the cabinet secretary has outlined, if passed, this technical bill will make a number of amendments to the 2005 act. The bill seeks to give OSCR, the charity regulator, wider powers to investigate charities and charity trustees. It amends the rules on who can be a trustee or senior office-holder in a charity—vital roles that must be properly supported—and increases the information that OSCR holds about charity trustees. The bill also updates the information that is required to be included on the Scottish charity register and to create a record of charities that have merged. Importantly, all of that seeks to make charities more accountable and transparent in their governance and operational arrangements.

I am very grateful to the Social Justice and Social Security Committee for its detailed scrutiny of the bill over recent months and for its stage 1 report, which was published last month. As someone who does not sit on that committee, I found the report helped me to better understand the issues that are covered in this technical legislation. Other members have already highlighted specific issues or areas of concern, but I will reinforce the calls that have been made on the Scottish Government for early and direct engagement with the breadth of the charity sector, not only over the coming stages of the bill but for any and all future reviews of charity law in Scotland.

Similarly, we should all share the responsibility for the provision of clear information, to ensure that the sector as a whole is aware of the provisions in the bill and that there is shared understanding of the implications of the legislation for charities and regulators alike.

The bill is clearly not intended to be a complete review or reform of charity law but intended rather to enhance the measures that already exist. However, the various consultations that have led us to today, particularly the evidence that the Social Justice and Social Security Committee heard, are clear: a more comprehensive review of the 2005 legislation is required, and I am grateful to the cabinet secretary for her statements of intent around the wider reviews.

As others have said, there are things that the bill does not do but which we would like to see considered. Specifically, Greens would like to see charitable concessions for activities that are good in and of themselves, such as the generation of zero-carbon energy, in the same way that poverty alleviation or supporting vulnerable people are seen as legitimate and laudable charitable purposes. Charities should not have to go through the bureaucratic process of setting up trading subsidiaries just to do good.

We would also like to see the explicit inclusion in charity law of each of the protected characteristics that are currently covered in the Equality Act 2010. Religion is, rightly, already covered, but we consider there to be benefit to ensuring that all protected characteristics are treated similarly in charity legislation.

However, I appreciate that those are substantial proposals and, along with many of the other issues that have been raised by other groups and organisations, some of which have already been highlighted this afternoon, they would all be better considered as part of the wider review that is already planned for future years.

In closing, I thank all those charities, individuals, agencies and groups that have contributed to the consultations and committee evidence sessions so far. That input is invaluable to our scrutiny of any legislation but is perhaps especially important when dealing with such technical legislation about the organisations and the sector that support so much of our lives. I know that there is still work to do and I look forward to following the progress of the bill through the forthcoming stages.

16:08  

Charities and third sector organisations work tirelessly to deliver for communities across Scotland. They deliver services, develop policies, provide volunteering and paid work, contribute hugely to the economy and provide food, shelter and financial support directly to people in all our constituencies. Without them, many people in the Glasgow region and across Scotland would be left isolated, in poverty, alone and without the essential care and support that they need. Therefore, I thank all the third sector organisations—and the people who work in them—up and down our country.

My party and I welcome the bill, which aims to bring regulation in the sector up to date and in line with other areas of the UK. For the most part, it does so, but I want to use my contribution today to highlight some areas where we need the Government to be a bit clearer and to act. I will also reinforce the importance of supporting and resourcing third sector organisations to make sure that they are not left to implement changes on their own.

One of the key areas is communication. Communicating the changes that the bill makes will be key for the vast number of third sector organisations, and the Government must be prepared to take a full and active role in that. It cannot leave the already stretched sector to do it itself. We heard evidence in committee from counterparts across the UK—I thank everyone who gave evidence to us on the bill—of the importance of not underestimating the scale of communication that is needed. I hope that the Government will take on board their advice from experience as that progresses.

Clarity will also be important, particularly on the categories of people who can and cannot be trustees or senior members of charity staff. Recruitment is tough, and the committee heard that loud and clear. We have heard the same in the chamber this afternoon. Whatever processes are put in place to ensure due diligence, which is crucial, we must also be clear on processes to waive the obstruction to taking up those posts.

For some people, being involved in charity work can turn their life around. That is why I am keen to hear what specifically the Government can do to ensure that the impact of the rules on who can and cannot be involved at those levels is proportionate, promoted and understood, and that they do not undermine efforts to recruit or efforts on equality.

The committee heard that the bill is welcome but that it is also largely OSCR’s bill. It told us that the current regulatory landscape is broader than this—and, in some ways, it is cluttered—and that the Government did not engage widely enough across the third sector to get that wider perspective early enough. For those reasons, I am pleased that the Government is committed to a wider review of charity law and regulation going forward. It is crucial that that review is independent and carried out with the third sector, and that the sector is supported to participate in it, not expected to carry out the engagement on its own.

The sector really is struggling; it is still waiting for multiyear funding and, with it, the ability to plan for future years and the certainty that that brings. Significant numbers of organisations fear that they could close, and volunteers and staff are stretched. Regardless, they are still powering on and acting as the last line of defence for people whom the state cannot help.

The sector needs that certainty of funding, and it needs to know that it will have the support and resources that it needs to engage in the implementation of the bill and the development of an independent review.

I take the opportunity to thank the sector, volunteers and staff again for all that they do, including those in the Glasgow region. I thank organisations such as Partick Thistle Charitable Trust, whose invaluable impact on its community I have seen at first hand and praised in the chamber; Healthy n Happy in Rutherglen, which supports and encourages our community to flourish; Glasgow Disability Alliance, which advocates tirelessly for the rights of disabled people; and Grow 73, which brings Ruglonians together to make a positive impact on the environment and transform the local community while building friendship in the process. Of course, I also pay tribute to the work of the SCVO, whose support and promotion of the sector enables it to develop and grow, and which never stops driving to push volunteer organisations to reach their full potential.

Will the member take an intervention?

I will.

I am very grateful to my colleague for taking the intervention. She is speaking about the SCVO, and it is crucial that, in any process of reform of the sector, the SCVO is a strong partner and takes a leadership role because of its extensive work to represent charities across Scotland of different size and scale. Does Pam Duncan-Glancy agree that, when the cabinet secretary sets out a plan for the next stage of engaging with charities, the SCVO very much needs to be at the heart of that?

I thank my colleague for that intervention, and I whole-heartedly agree. My hesitancy about taking the intervention at that point was only because I wondered whether I was able to do so in the last seconds of my speech.

SCVO support and promotion of the sector enables it to develop, grow and support people. It never stops striving to push volunteer organisations to reach their full potential. Therefore, like my colleague, I hope that the SCVO will be involved in that further review. Its work is invaluable, and we should do all that we can to support it and the rest of the sector.

Thank you, Ms Duncan-Glancy. The final speaker in the open debate is Fergus Ewing. Mr Ewing, you have a lavishly generous six minutes.

16:13  

You are so kind, Presiding Officer. Thank you for that.

As Pam Duncan-Glancy so eloquently said, we—all of us—owe a debt to those who give their time freely, generously and copiously to support charitable efforts throughout the country. Scotland would not be what it is without the effort of such individuals.

I add my thanks to OSCR and to the people who work in OSCR. I had the privilege of being the minister with oversight responsibility for it between 2011 and 2016, and I particularly enjoyed working with the Very Rev Dr Graham Forbes, who chaired OSCR for, I think, eight years from 2011.

This debate is about regulation of charities; regulation is absolutely necessary and we have heard reasons for that. John Mason made a number of telling points about it. Incidentally, I think that he was right to say that the audit limit should not be increased to £1 million. He is absolutely spot on about that.

The debate is about regulation of charities. When we create regulations in Parliament, we must be mindful that we do so only when they are necessary and when they comply with certain overriding public policy objectives. Principles have been set out by the regulatory review group, which is the Scottish Government body that has policy responsibility for looking at regulation. As I recall, the principles are that regulations should be proportionate, that they should not be unduly burdensome, and that compliance with them should not result in excessive costs, taking account of the size and scale of the charity and so on. Those are sensible and desirable principles with which I think we should all comply, and of which we should be mindful.

I want to talk about one particular regulatory impost that we would do well to look at again. Before I come to that, I note that recently the First Minister held an anti-poverty summit, at which he reaffirmed the objective of tackling—indeed, eradicating—poverty in Scotland. That objective is welcome and heartfelt and is of paramount importance to what we do in Parliament. Not many people, no matter what party they are in, would demur from that point of view. We also all know that charities play an absolutely pivotal role across Scotland in helping, in a host of ways, to alleviate poverty. People are passionate about that aim and it motivates them as volunteers in charities.

Perhaps the bulwark of that charitable effort is our churches. Certainly in my constituency, churches are behind a huge amount of the voluntary effort that goes into helping the people who most need help. That effort includes the efforts of Church of Scotland members whom I have met, who volunteer their time every week by going to help people at food banks. It includes people who simply organise coffee mornings, raffles and other events for the benefit of people who need help most. It includes the Salvation Army, whose work is truly magnificent in helping men who might have lost their way in life. The churches are behind so many things. I am talking not just about the Church of Scotland, of which I am a member, but about all churches and all faiths. Across Scotland, that effort is terrific.

One other piece of regulation—it is not in the bill, which I broadly welcome—that also regulates charities is the Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021. Those regulations were created to pursue land reform policy objectives. Principally, landed estates that are held in trust or by limited companies are often secretive in the sense that the people who live in those parts of Scotland do not know who the owners are, which creates a number of very practical problems. I think that addressing that situation was the aim of the regulations, although I was not involved in making them.

However, to take as an example the Church of Scotland, which has 6,000 properties, it was never intended that the name of every official in every congregation in every church of the Church of Scotland would have to be entered on that register. In what sense is it in the public interest to require that that information be disclosed? Moreover, I presume that as office-bearers change—as they do frequently for all sorts of obvious reasons—the register would have to be updated with a ream of information in which nobody is interested. It is not in the public interest that that information be required.

As the cabinet secretary pointed out at the beginning of the debate, in one section of the bill there is, rightly, a duty to provide the details of trustees; I think that Mr Mason referred to that as well.

Does Fergus Ewing agree that, with regard to the people who are regarded as trustees for church properties, it is actually the congregation that controls the properties and the trustees are simply names on a piece of paper, given that they cannot dispose of the property without the congregation’s approval?

That is absolutely spot on. Mr Balfour has made a relevant point with which I agree entirely.

Why have I mentioned the issue, Presiding Officer? I have mentioned it because at the moment much of the money that churches raise goes to alleviate poverty. However, the Church of Scotland pointed out in a letter that it sent in January—which, I imagine, other MSPs also received—that having to provide all that information for 6,000 properties will involve legal and administration costs of hundreds of thousands of pounds. Where will that money come from? It will come from money that would otherwise go to alleviating poverty and helping the poorest people in the country.

That issue was raised with the then Minister for Environment, Biodiversity and Land Reform, Màiri McAllan, and I think that it is now Mairi Gougeon’s responsibility. I appreciate that the cabinet secretary does not have responsibility for the matter, but I raise it because it is part of the overarching regulation of charities. It is not in the bill, but the matter needs to be looked at again. Personally, I think that churches should be exempted because there is no land reform interest whatsoever. That could be done by amendment of the bill, or perhaps by secondary legislation, which is probably more appropriate.

Fergus Ewing is making a very important point related to wider regulation of charities. My inbox has been filled by members of sessions of churches across Scotland who are very concerned. Given that the General Assembly of the Church of Scotland will meet from 25 May, would the member recognise that there might be an opportunity for the minister to re-engage with the General Assembly and the general trustees of the Church of Scotland to find some way forward?

I know that ministers have met the church and made lots of efforts. Thus far, they have ruled out exempting churches, but I think that that exemption is justified. The reasons for their ruling it out just do not hold water. I understand ministers’ reluctance to amend regulations that have only recently been passed, but I hope that I have made the argument.

In closing, Presiding Officer, and having had this lavish generosity from your good self, I say that this is not in any way a political point. If other members feel that I have made the point in a reasonable fashion and that the matter is something that should be reopened, I would be very happy to work, as I try to do on many issues, cross-party with them to try to bring about a change that would achieve and continue the First Minister’s aim of tackling poverty. It would do so in a small way, but hundreds of thousands of pounds can do a lot to help a few people and, as they used to say, monie a mickle maks a muckle.

Thank you, Mr Ewing, for doing justice to my lavish generosity, which I now bestow upon Paul O’Kane, who will close for Labour.

16:22  

I am very grateful to you, Presiding Officer, for your lavish generosity. I will attempt to justify it with my closing speech.

We have had an important debate this afternoon in which we have heard what I think is a broad consensus in Parliament for the general principles of the bill. As the cabinet secretary outlined in her opening speech, it is a technical bill and we are agreed on the need for it in order to tidy up charities legislation and to make it stronger, to ensure that the public have confidence in charities across Scotland and to ensure that Scotland is in line with England, Wales and Northern Ireland.

What we have heard, across the piece, is that in the later stages of the bill there will be a requirement for refinement of and clarity on a number of points that have been raised by members across the chamber.

Collette Stevenson in her new role as convener—to which I welcome her—made important points on behalf of the committee. She pointed out that the wider review that the cabinet secretary has committed to will require engagement with the third sector not just on these but on wider issues that it has raised with the committee. She made an excellent point about the need to start that engagement early and to ensure that the third sector is approached from the very beginning. Smaller charities should be included in that.

We have heard a lot today about charities that many members know from their parts of Scotland. It is important that they have a strong voice in everything that we do, because they are the people who make changes in communities.

The importance of those charities was highlighted again by Jeremy Balfour in his opening speech. He made an excellent point about good governance being crucial to the functioning of charities. However, like many others, he highlighted that greater support and stability are required for charities to ensure that they can meet their obligations and continue to serve their communities so well.

On the challenges that charities face as they serve communities, Douglas Lumsden made an important point about the challenge of recruiting trustees, particularly in rural communities. Many members represent rural communities and know that charitable organisations are often the lifeblood of small towns and villages and of everything that happens there. They can be long-standing historical institutions, but it can be hard in the modern context, particularly in smaller communities, to enthuse people about taking on the trustee role or dealing with the finances and operation of a charity.

We must keep our eyes open to that challenge and must ensure that we are not putting unnecessary barriers in place for people who might want to become trustees. As I said in my opening remarks, the bill is about striking a balance between transparency so that there is public confidence, and ensuring that we do not make regulation overly cumbersome, which might put off people who would otherwise want to become engaged.

John Mason made some important points about that. Our exchange during his intervention was about trying to strike that important balance. He made important points about interim and temporary trustees. Charities might need a bit of bridging support; there are people who have professional expertise and might be willing to do that, but might not have the confidence or the legal knowledge to do so.

Mr Mason also made an important point about wider regulation of charities and the need for reporting. He asked whether we should look at how charities that have an income of less than £25,000 should report to OSCR and about the level of scrutiny of their accounts. I hope that we can look at some of those issues as part of our wider conversation.

The issue of communication was raised. I said in my opening speech that many charities had felt unable to contribute to the committee’s consultation because of a lack of capacity. Foysol Choudhury rightly also highlighted that many charities were just not aware that there was a consultation. I hope that the Government will reflect on that.

Pam Duncan-Glancy made the excellent point that communication about the changes for charities will be vital after the bill has cleared the parliamentary process, so that everyone knows what is expected of them and what they need to do. Parliament should look at communication and I hope that the Government will reflect on that.

The Scottish Labour Party supports the principles of the bill. We all want charities in Scotland to be well-governed and transparent and to be charities that people can trust. We want to ensure that people who donate to a charity can do so with confidence and that people who volunteer do so knowing that the charity is reputable.

The debate has brought up wider issues about the health of the third sector in Scotland. There are multiple challenges, not the least of which are recovery from the pandemic, cost of living pressures and the demand for services. There is also no long-term strategy to fund and support charities. Parliament has been talking for a long time about three-year funding cycles; we need to look at that in the round in order to ensure that we are supporting charities.

Fergus Ewing made good points about the wider issues affecting faith-based charities and churches. We cannot get away from the fact that the bill interacts with other pieces of legislation. We should look at that, because there is cross-party concern about the issues that Mr Ewing raised. I would be happy to have further conversation with him—as, I am sure, would others.

I might now be going over the score regarding the generosity of the Presiding Officer, and I do not want to fall foul of the chair.

In concluding, I say that there is a real willingness, certainly on this side of the chamber, to work with the Government to get the bill right so that it does what it sets out to do and so that we take with us people from across Scotland’s charity sector. We look forward to the wider work to which the cabinet secretary has committed.

Thank you, Mr O’Kane. I am not sure that you were entirely reading my body language.

I call Miles Briggs. You have a generous seven minutes, Mr Briggs.

16:29  

I declare an interest as the chair of Heart Research UK’s heart of Scotland appeal board.

As others have done, I thank the clerks to the Social Justice and Social Security Committee and those who gave evidence to the committee. I also thank the charities across Scotland for the work that they do in our communities. As other speakers have said, we do not want anything in the bill to have a negative impact on any of them, and especially not on the smaller ones.

It is worth reflecting that my colleague Jeremy Balfour and I are the only current members of the committee who took evidence on the bill. Conservatives have said that we will be strong and stable, and we are definitely demonstrating that in this Parliament.

As members have mentioned, Scottish charities have a combined income of over £15 billion and employ 200,000 people, so it is important that they operate within a regulatory framework that safeguards that funding and those jobs. The charity law that they operate under has been in place for 17 years, and it is necessary to modernise it and provide more transparency. I do not think that any of us would disagree with that.

There are some very sensible things in the bill. It seeks to allow the provision of information about trustees and to update the law in relation to disqualification criteria. It also seeks to allow the appointment of emergency charity trustees. I pursued that in committee, but I still want more clarification from ministers as to who those individuals will be. Will there be a Scotland-wide group of individuals? I want Parliament to pursue that and seek clarification at stage 2.

As I said in my intervention on the cabinet secretary, I am concerned about lifetime gifts and charity mergers, which matter has been touched on previously. In the future, we will potentially see fewer charities, not necessarily because of the bill, but because of changes in the direction of travel. At present, many people very generously give lifetime gifts in their wills, but what happens to them if charities merge? I do not think that inheritance law has necessarily been taken into account in that regard. Again, I would like the Government to clarify the position on that at stage 2, because we need to make sure that we do not burden charities.

As a number of members, including Douglas Lumsden, Paul O’Kane and Foysol Choudhury, said, the bill must not become overly burdensome for charities, and especially not for small charities that are fully volunteer led. The fact that such charities are volunteer led may be a reason why many of them have not engaged in the process. They might not have been aware of it or they might not have had the capacity to input to the Parliament’s or the Government’s consultations. We need to take that on board.

The bill seeks to require charities to have a connection to Scotland. In committee, I asked about the definition of that, but I do not think that we have necessarily worked out what impact it would have when, for example, a charity that is not registered in Scotland but is a UK-wide charity undertakes research in Scotland. As John Mason and Fergus Ewing said, we need to be mindful of possible unintended consequences as the bill moves forward.

John Mason made some interesting points that may be relevant—if not to the bill, then to future consultations and reforms. It seems unfair that a charity that operates in Scotland and has income of less than £25,000—that could be a church hall anywhere in Scotland—is under the same regulation. We need to look at that. I do not know whether there should be an income threshold or an employment threshold, because there are different criteria and costs around administration.

We have not had an opportunity to input on that. It is probably not something that the Government will open up at stage 2, but it is something that we need to be mindful of. I am keen to pursue it and consider whether we could have different criteria, and I hope that there may be a cross-party consensus in favour of taking that forward in the next session of Parliament. I believe that the Government has stated that it might consult before the end of the current session on what that should look like. I certainly think that there is an opportunity for us to do that.

My final point is about the recruitment of interim trustees. The Government has written to the committee—we discussed that this morning—with clarification of who those individuals would be. That is important, as is the appeals process for individuals who might not be considered suitable. I hope that we will have an opportunity for further clarification of that at stage 2, which is coming very quickly down the line.

Finally, I thank everyone who has contributed to the debate and to the work of the committee. If there is one thing that we, as a committee, have heard loud and clear, it is that charities want to make sure that every penny that they raise goes to the front line of the causes that they advance in Scotland. Certainly, I have been clear in our work on the committee that we do not want the legislation to be burdensome on them in any way.

I take the points that Fergus Ewing raised and have reached out to the Church of Scotland on them. We need to look again at registration of persons who hold a controlled interest in land. Charities that operate in very different circumstances have also made the point about privacy, which is fully understandable.

The Scottish Conservatives will support the bill as proposed at stage 1. However, as the committee’s new convener, Collette Stevenson, has stated, that support is for the general principles of the bill. We now need ministers to provide detailed answers for the sector. Then, collectively, the Parliament will be able to approve the bill, I think, as it goes forward.

I call Shirley-Anne Somerville to wind up.

16:36  

I thank members from across parties for the constructive spirit in which the debate has been conducted, and I look forward to working with them as we work towards stage 2 and our further deliberations.

I am also pleased to welcome Collette Stevenson to her new role as the convener of the Social Justice and Social Security Committee, and I look forward to working with her and with the experienced and the new members of the committee. I was going to say “old” there, but I thought no—it is the experienced members and those who have just joined. I have been ably supported in my preparations for the debate by my two junior ministers, who were on the committee and who heard all the evidence that was put in front of it.

Today has been an important chance for all of us to reflect on the importance of charities and the important roles that trustees play. I have been a trustee in the past. Ironically enough, given my current portfolio, I was a trustee for Shelter Scotland, as it has carefully reminded me since I took on my role in social justice. Certainly, during my time with it, I absolutely recognised the important role that a trustee can play in a charity.

That is one of the reasons why the bill is so important. Yes, it is quite technical, and we have been through some of that today, but it is about ensuring that we have the best possible conditions for the charity sector to thrive in and to strengthen our communities. Public support for and trust in charities is strong, and we need to make sure that that continues. It is important that we reflect on the sheer breadth and depth of our charity sector in Scotland.

A number of contributions today were not technically to do with what is in the bill but were very important. I hope that, if people wish it, they will be among the aspects that we take forward in the wider review of the framework for charities. It was clear during the consultations and discussions with stakeholders that they support the principles behind the bill but are keen for more to be done. That is exactly why, as I said in my initial remarks, we are committed to a wider review of charity regulation following the passing of the bill.

That wider review can explore how regulation can help with and improve the situation for all charities but especially the smaller charities, which have been mentioned by a number of contributors and which make up the majority of the Scottish charity sector.

I am also well aware of the pressures that smaller charities are under, and we are absolutely determined, as we move forward with any wider review, that we will work with the charity sector, from the largest to the smallest charities, so that we engage with everyone.

We will take the time to work with them to design the review and what needs to be taken account of in that. I am happy to confirm that organisations such as the SCVO, which has been mentioned, will play an important role in that.

A number of members mentioned a very important aspect that we all have a responsibility to encourage: the diversity of experience on charity boards. That is very important, particularly for charities that want those with lived experience to be part of their trustee boards.

The aspects around automatic disqualification and the extension of the criteria around that to match those in other parts of the UK are not designed to exclude those with lived experience from participation on charity boards. The measures are designed to address a comparative weakness in the regulatory system here, in Scotland, that could undermine public trust and confidence in the charity brand. The existing waiver system and its extension to the new criteria demonstrate that the law recognises that there will be cases in which a person who is disqualified can, and should, still hold a trustee or senior management position. It is important that we encourage charities to recognise that that is there and to take advantage of it, should they wish to do so.

Jeremy Balfour and others discussed the appointment of interim trustees. The power to appoint interim trustees is a targeted power. It is very much intended to be used only as an emergency measure to address situations in which, for example, there are no trustees to make decisions. It is a time-limited measure to safeguard charities and charitable assets and to get charities back up and running. In situations such as that, when there are no trustees about, I would contend that a dispute mechanism is not necessary. However, if Mr Balfour or other members believe that that should be looked at, I would be happy to meet them as we progress to stage 2, to see whether anything more needs to be done on that.

As many members have mentioned, charity trustees are responsible for managing money and property that is donated to the public in good faith. That is why current and proposed disqualification criteria are based on behaviour or conduct that the Government considers makes a person unsuitable to hold office as a charity trustee, and it is why the Government considers that the criteria should be extended to those in senior management positions.

Disqualification on the ground of a specified offence or bankruptcy is time limited. Once the conviction is spent or the bankruptcy is discharged, that disqualification falls. In the interim, the individual can participate in the charity in alternative ways—for example, as a volunteer—or can apply to OSCR for a waiver.

I will spend a little bit more time on the challenges that are faced by smaller charities. We recognise the concerns about the administrative burdens that the bill will give to charities—particularly smaller charities. However, I would reassure members with the fact that the main administrative change that will impact charities following the bill’s passing is the provision of trustee information to OSCR. That will take place using OSCR’s existing online system, which charities will be well familiar with, and it will be done over time. The development, introduction and population of that internal schedule of charity trustees is likely to take place over two to three years, for example. Charities will therefore have significant time to prepare. That is important, and I reassure members that we will continue to work with charities as we go forward with the bill and its implementation to ensure that we are fully cognisant of any burdens that are being placed particularly on smaller charities.

In relation to that point, I also note that it is anticipated that there will be two commencement dates in regulations—one in spring 2024 and one in summer 2025. That will allow OSCR sufficient time not only to prepare and consult on new guidance but also—very importantly—to then communicate that to charities and ensure that they are well prepared for the changes. That point was raised by a number of members.

The message from today’s debate is that there is broad agreement on the general principles of the bill. Yes, there is work to do, but I certainly hope that we can work together on that as we move to stage 2. It is very important to send out today a clear signal from the chamber about this Parliament’s determination to support Scotland’s charities. I look forward to the bill progressing to its next stage. I will end on the important point of, once again, thanking all those who work in our third sector for everything that they do, day in, day out, to support communities across not only Scotland but the world.

That concludes the debate on the Charities (Regulation and Administration) (Scotland) Bill at stage 1.