Investigations and power to suspend

Charities (Protection and Social Investment) Bill [Lords] – in a Public Bill Committee am 10:45 am ar 15 Rhagfyr 2015.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Anna Turley Anna Turley Shadow Minister (Cabinet Office)

Clause 2 sets out the powers for the Charity Commission to take action where a charity fails to remedy a breach as specified under a warning. Our amendment 3 sought to ensure that where a warning had been challenged through the charity tribunal the charity was not automatically able to take action under clause 2. Given that we withdrew our previous amendment, I decided not to move amendment 3, because it was pursuant on a charity tribunal.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office 11:00, 15 Rhagfyr 2015

I hope it will help if I briefly explain the purpose of clause 2. As the amendment has not been moved, I will not respond to it.

Clause 2 does two things. Firstly, it puts beyond doubt that failure to comply with an order or direction of the commission, or failure to remedy a breach specified in an official warning, constitutes misconduct or mismanagement. Second, it enables the commission to extend a suspension pending removal by up to one year, subject to a two-year overall limit.

I will deal with extending suspension first. The commission requested the extension to its existing suspension power because in some cases it must await the outcome of a criminal investigation before it can proceed with its regulatory action, and in some cases that can take a significant amount of time. In giving evidence to the Joint Committee on the draft Bill, Detective Chief Superintendent Terri Nicholson highlighted a recent case where a suspension had come “very close” to expiring under the 12-month limit while a criminal trial was ongoing.

I will provide the Committee with two other examples of when the commission may be required to extend a suspension, as envisaged under clause 2. The first is where the commission is notified of serious regulatory concerns in a charity relating to significant governance failures and the failure to account for a large sum of charitable funds. An action for civil recovery is initiated by a debtor to the charity and takes more than one year to settle, during which time the commission is only able to suspend the trustees for up to one year and cannot take further regulatory action that could prejudice the ongoing litigation.

Another example is a trustee of a charity that looks after children being charged with multiple offences against the person, some of which include offences against young people. Due to the complexity of the case, the trial does not take place for 16 months after charge, after which the case is thrown out on procedural default. The commission would not be able to extend suspension of the trustee beyond 12 months as things stand, despite the clear risk the individual may present to the charity’s beneficiaries. This provision allows the commission fully to carry out its regulatory role, as it will not be restricted by waiting for the outcome of a prosecution, while the two-year overall cap on a suspension presents an appropriate safeguard.

I now come to the provision that effectively deems misconduct or mismanagement where there is a failure to rectify a breach identified in an official warning. The provision simply makes clear that certain failures will constitute misconduct or mismanagement, which enables the commission to move to open a statutory inquiry and gives it access to temporary protective powers. It will help the commission in escalating cases in which the trustees fail to address the issues, as the commission will no longer need to make the case every time that such failures constitute misconduct or mismanagement.

Where an official warning identifies a breach to be remedied, it will be for the trustees to determine how to remedy that breach. The commission can provide advice and guidance for trustees, but it will be their responsibility to decide how to remedy the breach and to demonstrate that it has been properly remedied. Let me at this point make it clear that simply failing to follow best practice cannot, in itself, constitute misconduct or mismanagement. However, trustees must be able to show that they have properly fulfilled their duties, and demonstrating adherence to best practice will sometimes be the easiest way to do so.

Originally, we did not include the provision deeming misconduct or mismanagement in the draft Bill, but the Joint Committee suggested that it be included, provided we accept its recommended changes to the official warning power—most, but not all of which, we accepted. The Joint Committee also recommended that the commission should not be able to rely on failure to rectify a breach set out in the official warning until the period for appealing against the warning has expired, which was the topic of amendment 3. As that amendment has not been moved, I will finish there.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3