This item was published during the term of a previous administration that ended in April 2007
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Charity law to be reviewed
28/05/2003
The Executive plans to create an Office of the Scottish
Charity Regulator (OSCR), MSPs were told today.
Communities Minister Margaret Curran made a statement to
Parliament on charities law in the wake of the case of
Breast Cancer Research (Scotland) whose assets have been
frozen by the court after it was discovered a large
proportion of its income was devoted to internal
expenses.
Ms Curran said the new regulator would be an Agency of
the Executive, and legislation would not be required in
setting it up.
"These arrangements will deliver, and deliver soon, a
more robust regime of regulation, building on the wide
powers available to Ministers under existing
legislation.
"But I most certainly do not rule out putting the
regulator on a statutory footing in time, if I consder this
to be necessary and will be giving the matter serious
consideration."
The Minister said the OSCR, taking over from the present
Scottish Charities Office, would provide a central
authority to 'monitor, supervise, and investigate'. It
would also have the potential to intervene to stem
difficulities bedore they became too serious.
Full text of statement:
I welcome the opportunity to be able to make a statement
to Parliament today about charity law. This is a topic
which is new to my portfolio and I welcome it as charities
are vitally important to our communities in Scotland.
Charities deliver a wide range of services and their
work with disadvantaged and marginal groups plays a key
part in achieving greater social justice in Scotland. It is
essential that we enable charities to operate in a climate
of trust and respect by providing firm and fair regulation
in which the public can have confidence.
I am sure members are aware from the press of the case
of Breast Cancer Research (Scotland). I share public
concern that money which was donated for charitable
purposes has not been used as would have been expected.
This has the potential of undermining charities in
Scotland. I will not comment further than that as the case
is sub judice.
But I pledge to you as the new Minister with
responsibility for charity law that I will be looking at
the issues raised by this case as I develop proposals for
the charity legislation to which we are committed in the
partnership agreement.
The Executive's response to the McFadden report -
published at the end of last year - contains responses to
all the recommendations in the report as well as setting
out our plans for the way forward. We accept the thrust of
the report - that there should be better regulation of and
support for charities in Scotland.
Our plans will provide charities and the public for the
first time with:
- an up to date register of Scottish charities;
- a central source of support and advice for
charities, their trustees and the public;
- creating the Office of the Scottish Charity
Regulator or OSCR, whose functions will include the
routine monitoring of charities, for example through
scrutiny of annual accounts. This will directly address
a gap in regulation which has been a cause of concern
for some time.
The Executive is working hard on the many tasks needing
to be done to bring OSCR into operation as soon as
possible. We have been carrying out a location review in
accordance with our policy of bringing the benefits of
public sector jobs to the whole of Scotland and I will
shortly be announcing where OSCR will be located and then
the Regulator's post and other staff will be appointed as
swiftly as possible thereafter.
The new regulator will be an Agency of the Scottish
Executive. The agency model is an established and effective
way to deliver regulatory functions. It also means that we
do not have to wait for a legislative opportunity to set up
a regulator but can set it up quickly. Our target is for
OSCR to be operational as soon as possible and will be
taking swift action to move things on.
These arrangements will deliver, and deliver soon, a
more robust regime of regulation, building on the wide
powers available to Ministers under the existing
legislation - and we have seen some of the powers exercised
in the last few days by the Scottish Charities Office. But
I most certainly do not rule out putting the regulator on a
statutory footing (in time), if I consider this to be
necessary and will be giving this matter detailed
consideration as the Regulator begins to take effect.
The changes we are putting in place are designed to not
only encourage and support the work of charities but also
to reassure the public that their money and support is not
abused.
To this end OSCR will have teams engaged in monitoring,
supervision and investigation. Close working within OSCR
will enhance its ability to intervene effectively and to
stem potential difficulties before they become serious.
More serious matters will be rigorously pursued and
action taken as necessary. Where necessary, the regulator
will take civil proceedings in the courts, on behalf of
Scottish Ministers, for example to: suspend trustees;
appoint a judicial factor to manage a charity's affairs; or
have a charity's funds frozen in order to protect them.
Where there is a possibility that criminal activity may be
involved, the regulator will refer the case to the Crown
Office. It will be crucial that the investigations section
of the regulator's office includes the necessary expertise
to make judgements about appropriate actions and referrals
and the staffing of this section will include a Fiscal
nominated by the Lord Advocate.
OSCR will take over and build on the good work carried
out by the Scottish Charities Office and will have enhanced
resources to carry out monitoring and to gather
intelligence which might lead to earlier detection of
problems.
For the first time, OSCR will provide a central
authority in Scotland which will receive and monitor
charities' annual accounts. This will be done under
Ministers' existing powers to require charities to supply
their accounts without payment. OSCR will also publicise
charities' obligations to make their accounts available to
anyone requesting a copy.
OSCR will seek charities' consent to include copies of
accounts sent to them on a publicly accessible database.
Such transparency is very important to provide the public
with information and give confidence. Ministers will wish
to look carefully at whether we should also legislate to
make this a statutory matter.
And there are other areas of charity law where I think
there may well be a case for tightening the law. Public
charitable collections are often the first point of contact
between charities and the public. It is important that the
public have confidence in the way collections are carried
out. There is already a framework for regulating cash
collections at local level but the requirements are not
always understood or enforced.
OSCR will carry out a range of tasks to facilitate and
encourage better arrangements at local level for public
charitable collections.
The current regulation does not cover collections by
direct debit or standing order (sometimes called "tabard"
collections). Such fundraisers should abide by codes of
good practice. But we have said that, in principle, we
think that local authorities should be able to regulate
collections of promises of money. This would require a
change in primary legislation and I will be looking at
this.
The definition of charity is key to which bodies receive
the benefits of this status and fall to be regulated. We
agree with McFadden that the current definition of charity
is outdated and that a new UK-wide definition of charity
would be desirable. None was in prospect at the time the
McFadden Commission was carrying out its work, but now one
is. The Cabinet Office Strategy Unit report on charities
and the wider not for profit sector offers a modernised
definition based on the principle of public benefit and
with a wider range of purposes, encompassing for example
the promotion of human rights and the advancement of
amateur sport. The Strategy Unit definition reflects the
spirit of the McFadden recommendations.
This new definition would apply in Scotland through
decisions of the Inland Revenue, but I do not want to rule
out legislating for charitable status to be conferred in
Scotland by the regulator, either using the same definition
as the rest of the UK or a different one. But we need to
bear in mind that the Inland Revenue would still be part of
the scene - and a very important part. Eligibility for tax
relief is a reserved matter and is central to the viability
of many charities and a key attraction of charitable
status. If a different definition were introduced in
Scotland, we could be into difficult and confusing
territory, as recognised by McFadden, with the possibility
of different categories of charity operating here. These
are issues we need to work through, working closely with
the charities sector.
We are committed to legislation. Consolidation and
updating of the existing statutes is, to my mind,
essential. And we are on record that we see a need for
legislation (in due course) to:
- introduce a new legal form for charities - the
charitable incorporated organisation
- extend trustees' investment powers
- improve the procedures and powers of the charities'
nominee
And further review may result in proposals to put the
register of charities on a statutory footing and extend the
powers available to the regulator, including possibly the
power to grant charitable status as I have said.
I would conclude by saying that I am committed to better
regulation of charities in Scotland. I will ensure in the
best interests of charities and the public that the new
regulator which Scotland needs and deserves is put in place
as quickly as possible. Experience will determine exactly
what will be in the legislation we bring forward and the
new Administration will be giving further consideration to
this, but as I have made clear I will not hesitate to
legislate for a statutory regulator if I consider this to
be necessary. We see our plans and the development of
legislation as complementary. We believe it to be in the
best interests of charities and the public for us to ensure
that our plans are put into operation as early as
possible.