Statement by the Minister for Communities on Charity Law Reform
The full text of Margaret Curran's statement to Parliament
on24 September 2003.
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; second, to
consult further with the sector about the scope of any
supporting legislation; and third, 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 you 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 charities 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 twelve
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.