Chamber and committees

On the point that has just been raised, my understanding is that there is no definition of a religious charity, which is one of the technical difficulties with the bill. For that reason and others, I cannot support the amendment in the name of Jeremy Balfour.

Fundamentally, charities regulation is in place to ensure and maintain public trust in the operation of charities. The register of persons holding a controlled interest in land, known as the RCI, is an essential part of the Land Reform (Scotland) Act 2016, and that legislation was passed unanimously. The purpose of the RCI is to improve transparency in relation to land and property assets, irrespective of what type of legal entity owns them, and to ensure that a direct link exists between the property and whoever exercises a controlled interest in that property. The bill seeks to increase transparency in relation to charities.

I appreciate that concerns have been raised about the RCI, particularly by the Church of Scotland, and my assumption is that Jeremy Balfour’s amendment relates to those concerns. However, I must stress that a bill on charity regulation is not the place to try to address those concerns. Indeed, the amendment would change the obligations of the RCI, which have, as I have said, been debated in Parliament not just in relation to the 2016 act but in the discussions on the Scottish statutory instrument on the RCI.

The information that will be available on the Scottish charity register under section 2 of the bill is a charity trustee name. The RCI relates to transparency in ownership and control of property and, as such, requires additional information to simply a list of names. Therefore, the information that is required is not the same and the two registers are not like for like.

The Scottish Government has had considerable recent engagement with religious organisations, particularly the Church of Scotland, in developing the RCI regulations. To address the concerns of some religious stakeholders, the transitional period before offence provisions take effect for non-compliance was recently extended by 12 months to 1 April 2024, with the unanimous support of Parliament. That provides those who need to register with the RCI with more time to prepare their submissions.

All parties supported the introduction of the RCI, which is a key part of our land reform strategy. Parliament has made much progress on delivering greater transparency in relation to individuals who have control over decision making in relation to land. The RCI regulations are a complex piece of legislation, and there is a risk that amendment 21 would lead to unintended consequences.

I therefore urge the committee not to support amendment 21.

Amendment 22 appears to follow on from a recommendation that was made in the committee’s stage 1 report. In my response to that report, I agreed that

“effective and open communication ... is vital ... to ensure smooth implementation”.

OSCR also wrote to the committee to set out an initial outline for communicating changes to charities. In addition, it confirmed that it would share its plan with the committee ahead of engagement with the sector.

Amendment 22 focuses on charities with two or fewer employees, but that covers 73 per cent of charities. OSCR would, in any event, be expected to aim its support and guidance at the majority of charities. The amendment also requires OSCR to communicate with each charity, but at present it is not possible for OSCR to do that. That is why we have put section 11 in the bill and lodged amendment 20. There are more than 25,000 charities and, although OSCR has contact details for the majority of them, communicating with each one is not technically possible.

However, I am sympathetic to what Mr Balfour is trying to achieve. I would be happy to work with him on a stage 3 amendment that would enhance OSCR’s existing reporting requirements. I therefore urge him not to press amendment 22.

Amendment 23 would require ministers to carry out a review of the act that the bill becomes, starting six months after royal assent, and to lay a report before the Parliament

“no later than 31 December 2025”.

We do not expect the act to be brought into force within six months after royal assent, so there would be no experience of the act in practice at that point. Also, an adequate amount of time is needed for an act to embed so that evidence for a review can be gathered.

I press amendment 13.

Amendment 13 agreed to.

Section 13 agreed to.

Section 14—Notice and obtaining information

I would be open to that, but I am not sure that it would have the effect that Mr Balfour would want. I say that because, if we agreed to an amendment that included a timescale for a review that fitted better with the commencement plans, it would be necessary to divert resources from the wider review that we, as a Government, have already said we will undertake once the bill is enacted. We would be obliged to carry out a review even if nobody was calling for it or had any issues in practice. I do not believe that that is the right approach, particularly when any stakeholders who might want to raise specific points relating to the bill will be engaging with the wider review that we have committed to and will no doubt raise any points there that they want us to consider.

For those reasons, I am afraid that I have to say no to Mr Balfour—I would not be open to that. I do try to oblige Mr Balfour with amendments and assistance, but I will not in this case.

Convener, as I have set out to the committee previously, the Scottish Government intends to take a phased approach to implementation, with at least two sets of commencement regulations anticipated in spring 2024 and summer 2025. That is to allow charities and OSCR the time that they need to prepare for the changes and to give OSCR the opportunity to consult the sector, produce guidance and communicate the changes. The Parliament has the ability to conduct post-legislative scrutiny of any act, so it is not necessary for such actions to be specified in the bill, particularly if the specified timings for them do not align with the expected commencement of the bill.

As I have already mentioned, the Government is committed to conducting a much wider review of charity regulation following commencement of the bill. My officials are already preparing the groundwork for that, and I have carried out meetings on the issue as well. I am committed to working with the sector to shape that review and to ensure that there is a proper opportunity for engagement. During stage 1, members and stakeholders were very clear about the importance of doing that, and I very much agree. A review of the bill would, as I have said to Mr Balfour, hold up that wider review by diverting resources. I therefore urge the committee not to agree to amendment 23 if Mr Balfour moves it.

These are three very minor amendments. Amendment 15 removes a redundant cross-reference. Amendments 17 and 19 modify two of the headings in the 2005 act, which OSCR and the Charity Law Association, respectively, flagged as being potentially confusing or inaccurate. My thanks to them for highlighting those points.

I move amendment 15.

Amendment 15 agreed to.

Amendments 16 and 17 moved—[Shirley-Anne Somerville]—and agreed to.

Amendment 2 addresses the recommendation made by the committee at stage 1 to provide for a dispute mechanism in connection with OSCR’s appointment of interim trustees. The committee raised the issue that there was a lack of recourse for any existing charity trustees of a charity to which interim trustees are appointed. The amendment addresses that issue by extending the established review and appeal mechanism under the Charities and Trustee Investment (Scotland) Act 2005 to appointments of interim trustees in cases in which it is known that there are still some existing charity trustees continuing to act.

The new provision that is introduced by section 8 is designed primarily to capture those small number of cases in which there are no trustees acting for the charity. However, I accept that there might be some occasions on which an existing trustee could still be acting and a right of review over OSCR’s decision is warranted. The same is also true of the existing appointment process, which is restated by section 8.

In that scenario, although the aim is that the existing trustees would ask OSCR to step in because they are unable to make an appointment themselves, that request does not have to be unanimous. As such, I agree that it is right that there should be a review and appeal mechanism for any trustee who wants to challenge that decision. I hope that members will therefore support the amendment.

I move amendment 2.

Amendment 13 introduces a new section to the bill, albeit that it is on a topic that has previously been subject to full public consultation. Amendment 13 seeks to clarify the existing provisions in the 2005 act that relate to the reorganisation of endowments held by what are often referred to, for shorthand, as statutory charities—that is, charities that are constituted under royal charter or royal warrant or an enactment. An endowment is property where the capital has to be preserved and only the income is spent on the fund’s charitable purposes.

For most charities, if the charity’s constitution would not allow it to take an action such as varying its constitution, transferring its property to another charity or amalgamating with another charity, the charity can apply for a reorganisation scheme to allow it to take that action, if OSCR grants consent.

However, those rules are turned off for statutory charities, subject to a specific exception relating to endowments. The wording of the existing provision has caused confusion for some statutory charities and OSCR about the extent to which an endowment can be reorganised by OSCR. In some cases, that has meant that the only way forward is through the use of private bills to reorganise endowments. My amendment 13 is intended to resolve that issue and to allow endowments that are held by statutory charities to be reorganised, as we believe the 2005 act always intended.

It is not a straightforward area of the law and, as such, I anticipate that there might be a need for further technical refinement of the proposed new section at stage 3, once detailed feedback from charities, legal professionals and OSCR has been received.

Given the complexity that is involved, there are also wider issues around statutory charity reorganisation that would still need to be considered in the post-bill review. However, amendment 13 provides a solution in the short term for some statutory charities, and they should see significant financial savings by no longer needing to reorganise through a private bill.

It is right to deal first with fixing the rules around endowments, as there is a long historical precedent for those being allowed to reorganise more readily, and there is existing provision on which to build. It was also the current exception relating to endowments that OSCR asked us to clarify in its 2018 paper with the proposals that form the backbone of the bill.

Amendment 13 contains two new regulation-making powers for Scottish ministers. The first is a power to adjust the definition of “endowment”, should practical experience of the new provisions give rise to any issues.

The second power gives ministers the ability to disapply—through regulation—those changes in respect of particular endowments or charities, or classes of endowment or charity. The latter aspect is considered necessary in order to ensure that, where there are policy reasons for restricting the reorganisation of a particular endowment or charity, that can be achieved.

I hope that members will agree that we should do what we can do now to refine the provision on that topic that is already in the 2005 act. Then, in the post-bill review, we can turn to the much wider question of reorganisations that do not involve endowments.

I move amendment 13.

I have no further comments.

Amendment 1 agreed to.

Section 2, as amended, agreed to.

After section 2

This group deals with notices that are given both by and to OSCR. I will speak to amendments 14 and 20 first, which deal with notices that are given by OSCR.

Amendment 14 makes a minor change when OSCR is obtaining documents from a third party for an inquiry into a former charity. The amendment clarifies the application of the rule that ensures that, when a body continues to exist but without charitable status, notice is served by OSCR on the body that used to be a charity.

Amendment 20 is designed to provide OSCR with alternative methods of serving notice in certain circumstances.

As part of its overarching duty to act in a fair, transparent and proportionate way, OSCR is required to serve notice on a charity or a charity trustee before it can take specified regulatory action—for example, issuing a direction.

However, in some cases, OSCR does not have accurate contact information for the charity or trustees in order to serve the notice, which means that OSCR is prevented from pursuing regulatory action, as it is unable to serve the required notice. Although the introduction of an internal schedule of trustee details held by OSCR will, in large part, address that problem, there will, inevitably, be cases in which contact information is unavailable or becomes out of date.

Amendment 20 will allow OSCR to serve the relevant notices by other means—for example, by publishing a notice on its website. Serving notice by other means would be used as a last resort when previous attempts to contact the charity directly had failed. That will allow OSCR to continue its regulatory action.

Amendment 20 relates only to notices in respect of which the action being taken is such that it is still appropriate to take it even if the charity or body in question cannot be contacted directly. For example, if a direction is issued to a bank not to part with charity funds but the charity also needs to be notified of the direction, there would be value in issuing that direction to the bank even if the charity itself cannot be located and can be notified only by means of a public notice.

I turn to notices that are given to OSCR. Amendment 16 addresses concerns that were raised by stakeholders—in particular, the Law Society of Scotland—about the current requirement that charities wishing to take certain actions that require OSCR’s consent give OSCR at least 42 days’ advance notice before they take the relevant action.

Amendment 16 does not remove the need for charities to obtain OSCR’s consent before taking such actions; it means that, once OSCR grants its consent, the charity will be able to act straight away, if it wishes, instead of having to wait until the end of the 42-day period.

I hope that the committee will agree with the approach that is being taken to all these notice requirements and that it will support all the amendments in the group.

I move amendment 14.

Amendment 14 agreed to.

Section 14, as amended, agreed to.

Sections 15 and 16 agreed to.

After section 16

Good morning, convener.

Section 2 imposes a specific requirement to include the names of charity trustees on the Scottish charity register. As well as ensuring transparency and accountability in charities, the section aims to ensure that the publication of any information does not put anyone at risk. When the safety or security of any persons or premises could be jeopardised, an application for dispensation can be made to the Office of the Scottish Charity Regulator to exclude the charity’s contact address or any trustee names from the register.

A discretionary element was added to the bill to allow OSCR to apply dispensations to a charity or class of charities without the need for an application—for example, in the case of a women’s refuge charity. However, OSCR has expressed some concerns regarding that element of discretion. In particular, it is concerned that it might create an additional burden on OSCR to look behind every charity entry on the register in order to ascertain whether dispensation should apply. That was not the intention of the provision.

Following discussion with OSCR, the Government is satisfied that the key policy intention can be achieved in other ways—for example, by OSCR taking the initiative to contact a particular charity or class of charities to discuss any security concerns with them and to invite applications for dispensation that could then be processed swiftly.

As such, amendment 1 adjusts the process to be followed before a dispensation is granted. It removes OSCR’s ability to grant a dispensation of its own accord while retaining the ability to grant dispensation and remove the relevant information following an application from a charity or trustee.

I hope that the committee appreciates the need to overcome this technicality.

I move amendment 1.