Charity Law
The next item of business is a statement by Margaret Curran on charity law. The minister will take questions at the end of her statement; therefore there should be no interventions.
I welcome this opportunity to make a further statement to the Parliament about charity law reform. I am sure that members will be familiar with the background to the subject. The issues are complex and there is interplay with the United Kingdom Government's agenda for charity reform and its tax responsibilities. However, I am confident that I am able today to set out a basis for the robust and effective regulation of Scottish charities that will give Scotland the regulatory framework that it deserves.
In my previous statement in May, I emphasised the Executive's commitment to introducing a more effective regulatory regime for charities in Scotland, including, in general terms, an intention to introduce legislation to underpin the new arrangements. Subsequently, I set out my strategy for proceeding with those proposals in response to a parliamentary question on 27 June. The three key elements of the strategy were: first, to move to establish the office of the Scottish charity regulator as an agency of the Executive in Dundee before the end of this year; secondly, to consult further with the sector about the scope of any supporting legislation; and thirdly, to report back to the Parliament once I had taken the opportunity to discuss options with members of the Cabinet.
There have been repeated calls for charity reform from the public, the charity sector and indeed from the Parliament, particularly over the past few months. I felt that it was important, therefore, to set out my proposals to members as soon as possible, so that we can commence implementation of my strategy without further delay. I am pleased to be able to take forward that strategy and to announce today that the Government will bring forward new primary legislation on charity regulation in Scotland. A draft bill will be prepared for consultation in spring next year.
The bill will set out a Scottish definition of charity, based on the principle of public benefit, which will be compatible with the definition that the UK Government is adopting. The office of the Scottish charity regulator will be turned from an Executive agency into an independent statutory organisation with an enhanced range of powers. The bill will empower the regulator to maintain a publicly accessible statutory register of all charities that operate in Scotland, which will form the cornerstone of the office's regulatory functions. The bill will also set out improvements in the regulation of fundraising—including improved transparency in the information about the use of funds that charities raise—and set out a number of tidying-up measures that will be designed to assist charities' operations.
I will consider each of those aspects of the bill in turn. The new definition of charitable purpose will be based on the concept of public benefit and on 12 identified categories of charitable activity. Under that arrangement, it will be for the regulator to set out its criteria for public benefit, drawing on case law to allow for flexibility and evolution. That is consistent with the approach that the UK Government is taking in preparing its legislation. Such consistency should allow charities that operate both north and south of the border to do so on a level playing field. The approach will also allow the Inland Revenue to dispense tax relief to charities on a common basis, irrespective of their geographical location. Bodies that already have charitable status will remain as charities until the regulator is able to develop new guidance on the nature of public benefit. I do not expect the new definition to lead to significant change for existing charities.
The bill will transform the office of the Scottish charity regulator, which will become an independent statutory organisation—probably a non-departmental public body—with an enhanced range of powers. The statutory regulator, which should take over from the interim body that is being established this year, will be able to determine whether a body has the status of a charity in Scotland and will actively monitor and regulate such bodies. It will have the power to provide advice and information on its regulatory role and to signpost good practice guidance elsewhere. The regulator will have the power to intervene in the management of charities and to suspend trustees where necessary—for example, if its investigations identify mismanagement or misconduct. It will also be able to take direct action in the courts.
The bill will require the regulator to maintain a public register of all charities operating in Scotland. That will underpin its proactive monitoring regime. The register will provide publicly available information on charities and allow members of the public to check on charities with which they are involved or which they wish to support. Charities will be legally required to submit to the regulator regular information returns such as annual reports and accounts. In order to avoid unnecessary regulatory burdens, the regulator will develop a proportionate regime for charities based on their size and, where a body is regulated by more than one regulatory authority, the charity regulator will be required to liaise with other regulators in order to avoid duplication.
The recent case involving Breast Cancer Research (Scotland) has highlighted the issue of controls over charity fundraisers. In considering the way forward, it is important to appreciate the distinction between professional fundraising bodies—which, as commercial businesses, are subject to control by the UK Government—and the charities themselves, which are subject to the charity regulator. I shall be discussing with the Home Office its plans for improved regulation on the business side in order to ensure that its proposals reflect Scottish needs. However, I agree with its conclusion that self-regulation by the fundraising industry is the first route to be tried. So far as the charities themselves are concerned, I plan to improve the transparency of charities' fundraising by requiring more clarity about that in their accounts. That will allow the public to see how much money a charity raises from external fundraisers and how much that costs.
A number of other legislative changes will be included in the bill to assist in the operation of charities and to improve their regulation. Those changes, which were announced by Jim Wallace last December, include allowing charities to have access to a new legal form—the charitable incorporated organisation—and extending trustee investment powers.
In today's statement, I have naturally looked to the future in setting out our legislative plans. However, I also wish to emphasise our continued commitment to setting up what will now be an interim regulator before the end of the year. I am pleased to announce that Jane Ryder, currently chief executive of the Scottish Museums Council, will be seconded to the Executive from December this year until May 2005 to take on the role of chief executive of the interim regulator. Jane will play a key role in setting up the regulator, in developing its initial range of functions and in paving the way for the transition to a statutory body once the charities bill has received royal assent.
I am pleased to be able to set out my plans, which will result in Scotland getting, at last, comprehensive, consistent and effective charity regulation. Recent events have undermined public confidence in charities and fundraising. The plan of action that I have set out today will rectify that. A statutory regulator, working proactively with increased powers will lead to a simpler and more transparent system of regulation, which I believe will secure the widespread support and confidence of both the public and the charities sector.
The minister will now take questions on her statement. I intend to allow around 20 minutes for that, after which we will move on to the next item of business.
I begin by thanking the minister for providing me with an advance copy of her statement. Her statement is very much welcomed by members of my party, as for some time we have been calling for reform of charity law, and her proposals sit well with our policy.
I seek clarification on several points in the minister's statement. First, she stated that there will be a new definition of charitable purpose, which will be consistent with the approach taken by the UK Government. I note the reasons why the minister has stated that. She went on to say that she does not expect a new definition to lead to any significant changes in respect of existing charities. Can she give us some idea of the sort of changes that she expects may be required?
Secondly, I note that the bill will transform the office of the Scottish charity regulator into an independent statutory organisation. If a charity is operating in two regulated areas, which regulator will have lead responsibility for actively monitoring and regulating that charity?
Finally, if there is a public register for all charities operating in Scotland, will charities that are registered in England also be required to register here in Scotland, and will they also be required to submit regular information to the Scottish regulator?
I thank Michael Matheson for his introductory remarks. I am pleased that we are making such progress and recognise his support for that progress. I agree that we should discuss the details of the implementation of the policy as we progress the bill.
One of the most important things that we are trying to ensure is that we do not create undue burdens for charities in Scotland. It is appropriate that we minimise undue regulation and allow charities to conduct their business; close discussion with the Home Office is therefore vital.
In my statement in May, I said that I would proceed with discussions with the sector about how we should take forward many of the matters to which Michael Matheson referred. I have had close discussions with the sector and have agreed a way forward, which I outlined.
Charities that will be registered and will operate in England and Scotland will, in the first instance, be required to register in both countries. As we develop relationships with the Home Office, we will consider how to minimise the need for two regulatory regimes, but such registration will have to happen in the first instance. One of the first tasks of, and the reason for, the interim regulator is to consider implementation and to ensure that we create a system that operates for the benefit of those charities. It might be appropriate that our regulatory regime is more significant in the first instance, but that will depend on the tax regime that is developed down south. Details will become apparent as the office of the Scottish charity regulator undertakes its duties.
I, too, thank the minister for the advance copy of her statement.
It will be noted that no Conservative member signed up in support of Jackie Baillie's proposed member's bill—the charities (Scotland) bill—because we recognise the need for a fully comprehensive review of charity law. However, the Conservatives support any actions and proposals to encourage the giving of money for charitable purposes in the faith that that money will be used for its intended purpose.
At the outset of the consultation on charity law, I ask the minister to strike a balance between managing fraud and overburdening organisations with regulations, particularly smaller charities, but also in relation to the setting up of new charities.
Again, I welcome the spirit of what the member says. We are at great pains to emphasise that we want to create a proportionate regime and that we should strike a balance. We should be aware of the debate in Scotland over the past six months about the need for effective regulation and the need to strike confidence in the public. We need a balance, so that charities operate effectively and do not spend their lives filling in forms—which they do not want to do. The fact that the interim regulator—Jane Ryder—will get to work soon will help us to ensure that we strike a balance, not only in principle but in the detail. As I said, we should liaise properly with the Home Office to ensure not only that we strike that balance, but that we do not miss other burdens that might be placed on charities through the Home Office or wherever.
Members will recognise that I have more than a passing interest in charity law. In that context, I warmly welcome the minister's statement. It is clear that the Executive has made substantial strides in its policy thinking; an independent regulator will be set up by statute, with a wide range of powers and real teeth to enable public confidence in charitable giving to be restored.
It will come as no surprise to the minister that I want to press her on the timetable. I note the welcome promise to bring forward the draft bill in the spring of next year and I have three questions.
When does the minister envisage the bill being introduced to the chamber? It is important to legislate as quickly as possible to avoid a repeat of the problems that were experienced with Breast Cancer Research (Scotland). Secondly, consistency with the UK Government is important, but does the minister acknowledge that we can nevertheless proceed should there be insufficient time at Wesminster? Finally, given the minister's inclusive style of working, will she include representatives from the McFadden commission and the voluntary sector directly in the drafting of the bill?
Members will notice that Jackie Baillie and I share not only a commitment to charity regulation, but the same dress sense.
I made it clear in the statement that we will introduce a draft bill in the spring. I cannot be more precise than that and, with due respect, I do not think that I have to be. My commitment to the sector and to the Parliament—which I think is broadly recognised—is that we will move swiftly with the legislation that is required, and we are honouring that commitment. It would be inappropriate for me to give specific timetables, as we need to ensure that we get the bill right and I cannot pre-empt the Executive's commitment to other matters.
Of course, I wish to be inclusive in progressing the bill. I put on record my thanks to the members of the McFadden commission, the Scottish Council for Voluntary Organisations and all the other members of the charity and voluntary sectors who have worked hard with me over the summer to come to terms with the complexities of charity law. I will continue that discussion with them.
I congratulate the minister. This is one of the best things that the Executive has done for some time. If the minister manages to push the bill through successfully, she will become the patron saint of the voluntary sector. I am sure that the real St Margaret was a great promoter of the Scottish voluntary sector in her day.
Defunct or moribund charities need to be dealt with. My favourite such charity was set up to support teetotal tailoresses in Leith—but it could not find any. There is money lying about in the lawyers' offices of a great many such charities in Edinburgh and that money should be unlocked. Will the minister ensure that the bill empowers the regulator to force sleeping charities out into the open? Will she also ensure that it simplifies the process of changing the purposes of a charity? At the moment, that is legalistic and cumbersome.
I thank Donald Gorrie for his question, which was different, as ever. I could never lay claim to being teetotal—I defer to Mr Sheridan on that—and I do not know much about teetotal tailoresses.
Nonetheless, Donald Gorrie makes a serious point, and there are associated issues concerning the relationship of a variety of smaller charities with the regulator. We do not want to make life unduly difficult for charities, many of which are only small. On the other hand, we need to know what the picture is in Scotland and the different challenges that charities face, to be as supportive of them as possible.
I hope that the regulator—especially in the interim phase—will devise means of finding the information that we need to create mechanisms that are appropriate to the charities' different needs, within a regulatory framework that builds confidence. We can consider the detail of what Donald Gorrie is suggesting and ensure not only that we act in the interests of the charities, but that the information on them is publicly available so that there is proper accountability.
I, too, welcome the statement. It is encouraging that space has been found in the legislative timetable for this measure—especially in the light of recent comments that the Parliament's legislative timetable was going to be clogged up if too many members' bills were introduced.
My question is about the new definition of charitable purpose and, specifically, about the statement that the minister does not expect the new definition to lead to a significant change in respect of existing charities. If the status of private, fee-paying schools was subject to change under the new definition, would the minister consider that significant?
That is an interesting way in which to phrase the question. The principle remains the same, in that the test is public benefit. We expect the regulator to define the criteria that will allow that principle to be tested. For example, in the case of independent schools, the regulator will give us guidance on what criteria to use in testing independent schools. Some would argue that such schools can fulfil the test through other means. However, we will wait for guidance from the regulator on that.
I am sure that the minister will accept my sentiment in the way that it is meant, when I say that her speech was the best one that she has made to the Parliament since I have been here. The speech was very welcome indeed. Can I press her on two issues? I hope that she does not mind my doing that. First, will she ensure that, at the drafting stage rather than the consultation stage after the bill has been drafted, voluntary sector organisations are widely included and consulted? Secondly, will she ensure that there is an absolute commitment to recognising that some charities have professional staff who can liaise and work with the law better than other charities, which are just as worth while, but which do not have such professional staff? Will the minister give an assurance that the proposed law will work as effectively for the smaller charities as it will for the bigger ones?
This is a most unusual day. I have been called a patron saint and I am agreeing with Tommy Sheridan. That really is news. I thank Mr Sheridan for his comments. I strongly agree with the sentiment that he expressed. We want the legislation to work in the interests of the smaller charities as well as the bigger ones. In terms of my relationship with the whole voluntary sector, I appreciate the role of the smaller voluntary organisations, which perhaps do not grab the headlines in the same way as the bigger players do—with no disrespect to them.
We will look carefully at the bill's detail to ensure that it works in the interests of smaller charities as well. The way to do that is to involve them in discussing the impact of our proposals, because we might not even see the situation in terms of their experiences. I can easily give a commitment that we will involve the full range of voluntary sector and charity sector interests when we draft the bill as well as when we consult on it.
Mr Rob Gibson (Highlands and Islands) (SNP):
I welcome the minister's statement that an enhanced range of powers will be brought together in the new agency. However, I am concerned about the need to change from an executive agency to another quango. Perhaps the minister can give me one or two reasons for doing that.
That is a serious point, which we have considered. When we announced—in May, I think—the creation of an executive agency called the office of the Scottish charity regulator—OSCR—Mr Gibson will know that there was criticism about that, not least from the Scottish National Party's side of the chamber. There were concerns that the OSCR was not distant enough from the Government. Some felt that the agency needed to be more independent, particularly as charities can be critical of the Government or seek to be independent of the Government's view.
I considered that argument. I would not naturally be inclined to set up organisations for the sake of it. I am not one who would want to give away control unless I had to. Can I qualify that statement? I had better be careful. There is a valid argument for having space from the Government. There is a need for more independence and for statutory regulation. That is why we incline more towards the NDPB model. We are considering different models for the independent statutory regulator—such as that in England, for example—because I do not think that we should automatically assume that the only model is that of a non-departmental public body. However, I should be honest and say that the new body is likely to be an NDPB. The sector itself strenuously argued for that model. The issue is also one of public confidence. That is why I was persuaded that we should have an NDPB model.
Like most members, I warmly welcome the minister's statement. I note that the minister proposes to appoint Jane Ryder as the interim regulator by the end of the year. What will Miss Ryder's key role be between then and 2005, when the new statutory regulator is due to be appointed?
I am grateful that Jane Ryder is taking up that position. Again, there was a question over whether we needed to go ahead with OSCR 1, as it will now be. However, I believe that it will be worth while to do so because it will allow us to move swiftly on the work that needs to be done to ensure that the charities bill bites as soon as it is implemented. For example, we will develop a publicly accessible database and register. We will continue to investigate charities that need support. OSCR 1 will allow us to develop guidance for the operation of charities and it will pave the way for OSCR 2. From my responses to other questions, Mr Barrie will know that I believe that we need to think in detail about what the second phase will be. The work that is being done by the interim regulator will give us a base to do that and allow detailed consideration of the issues.
I welcome the minister's statement. The minister will be aware that, in politics, perception can be the reality. In that regard, to someone with red/green colour blindness, the minister and Jackie Baillie might appear today to be Hibs supporters. Further, I wonder whether the minister's statement might not be just as illusory.
We know that the advancement of education will be one of the charitable purposes and, in answer to an earlier question, the minister said that the regulator will tease out in guidance how it is possible to demonstrate public benefit. To what extent, then, will the Scottish Parliament be able to have a say in the guidance that is prepared by the regulator, so that we can be assured that schools in places such as Mid Scotland and Fife, that have charitable status and that provide services to disabled children, for example, will retain that charitable status?
When I have taken other legislation through the Parliament, we have consulted the relevant committees on the guidance. I cannot imagine that it would be inappropriate to ensure that there is parliamentary involvement in the development of guidance in this regard.
I appreciate the background to Mr Monteith's question. I know why he asks it, but I do not think that our politics towards that sector are the fundamental issue; the public benefit test is the fundamental issue. I want to ensure that that test is applied consistently to all sectors across Scotland. To any sector that might feel threatened, I can say that there will be no undue interpretation of the proposals. All sectors or categories will have to prove that public benefit arises from their work. If they can do that, they should feel assured that the proposals will have no undue consequences.
I congratulate the minister on her canonisation as St Margaret, even if it is only by the Liberal Democrats.
The minister will be aware of the contribution that not-for-profit organisations, some of which are sizeable businesses, can make across the set of responsibilities that she and other ministers have. Can the minister assure me that, in developing charity regulation, she will pay particular attention to such delivery organisations, focusing not only on the burden that charity law places on them, but on the audit burden that they face generally? Will she ensure that their interests are taken care of by the interim regulator and her department when legislation is introduced?
I can give the member that assurance. Scotland has a complex range of organisations that are involved in charitable purposes in the broader sense. That is partly why we have to be careful with legislation of this nature. We have to take our time with it and ensure that we get it right because of the impact that it could have on those various organisations.
I assure the member that we will consider the not-for-profit sector in detail. Obviously, we want to support and encourage that sector by legislative and other means. We would not wish to place undue burdens on such organisations or create unintended consequences for them as a result of our proposals. Our consultation and involvement strategy will ensure that the details of the subject that Mr McNulty raises are understood and that those organisations have an opportunity to spell out the impact that the legislation will have on them so that the legislation addresses their needs as well.
The minister will appreciate that, in the first session of the Parliament, the Social Justice Committee pressed hard for early action to deliver effective legislation in this area. It is therefore good to see the matter being progressed.
I note what the minister has said about involving the charitable and voluntary sectors. Following Des McNulty's point, how does the minister intend to involve the co-operative sector and the co-operative movement, which have a distinctive voice and position on public benefit and on how they are placed in relation to that?
All the key stakeholders and interests will be involved in the consultation process to ensure not only that we enable the public to have confidence in the measures, which we need to do, given recent events, but that our proposals are seen as being proactive and helpful to the various sectors in Scotland.
I give Johann Lamont, the convener of the Communities Committee, a strong commitment to ensure that the interests of the co-operative sector and the co-operative movement will be considered in detail and that our officials will speak to them soon.