Companies (Audit, Investigations and Community Enterprise) Bill [Lords]

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Mr. Mitchell: Amendments Nos. 30 and 31 are absolutely clear, in that they would restrict the time for which an inspector or investigator may stay on the premises to one month. At the moment the period is completely open-ended. I seek the Committee's support for the idea that an inspector should be able to stay only for one month. I explained that I had considered a longer period, but that I wanted the legislation to introduce a constraint. Equally, however, amendments Nos. 31 and 30 are generous, because I make it clear that where one month is not adequate and a reason is given, the period can be extended. That is very clear indeed.

Jacqui Smith: In that case, I pose two potential readings of those amendments. First, they could be read as allowing an inspector to stay for a whole month, regardless of whether that was a reasonable

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period or was undertaken during reasonable hours. I do not think the hon. Gentleman intends that, but, given the drafting, that is how amendments Nos. 30 and 31 could be interpreted.

Mr. Mitchell: I hesitate to correct the Minister, but if she looks carefully, she will see that the words are ''not exceeding one month''. There is therefore no question of the inspector being able to remain for a statutory month as the period is any time up to, but not exceeding, one month.

Jacqui Smith: We might have to disagree on whether the effect is as the hon. Gentleman suggests, even given the intention that he has spelt out.

Mr. Mitchell: If I offered to withdraw the amendment and allow the Minister's Department to redraft the clause and bring it back on Report, would that be helpful?

Jacqui Smith: I know that the hon. Gentleman is always trying to be helpful, but I was about to explain the other reason why the amendment is not appropriate, even if he interprets it differently. It would be operationally impractical if, as I believe he is saying, an inspector could exercise the power to enter and remain on premises only during a single month, or only during any other time scale that the hon. Gentleman might want to identify. An investigation might be conducted over only a couple of weeks, but a very complex investigation might well need to be conducted for very much longer than a month and will comprise a variety of activities, not all of which will involve full-time or regular contact with the company.

Such an investigation might involve visits to the company, obtaining information from elsewhere and then having to return to the company. By constraining the ability to investigate within one month, we would, in effect, make it impossible for the company investigators to carry out their tasks, given the complexity of some investigations.

Mr. Mitchell: The Minister is missing the point. Of course an investigation might take more than a month, but the issue is whether the inspector shall stay on premises, which might be domestic, for longer than that period without thinking it through and without justifying his actions very carefully. The investigation might take longer than one month, but the issue involves whether it is accurate to suggest that the inspector needs to sit in a domestic home for more than one month in pursuit of that investigation. I submit that it is not.

Jacqui Smith: An investigator would not, as the hon. Gentleman says, sit in a domestic home for a month. That, clearly, would not fulfil the criteria of entering the premises at reasonable times or remaining there over a reasonable period. However, the investigator might well need to visit certain premises—including a director's home, for example—and have to return several months later, perhaps because it had come to light that there might be other information or that other documents could be obtained on those premises.

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I repeat my concern that what he is trying to do would be impracticable and would limit the ability to carry out an investigation.

Before I finish, however, I hope that I can make the hon. Gentleman happy.

On amendment No. 34, he suggested that he might have spotted a lacuna in new section 449 in that it does not protect information acquired by a person accompanying an investigator. In our view, that would be a rare event, but I would like to consider the situation that he has outlined, and I might well be prepared, if necessary, to table an amendment on Report.

I am extremely grateful to the hon. Gentleman for having brought the matter to the Government's attention. In that spirit of compromise, I hope he will withdraw his amendment.

Mr. Mitchell: I am, although Hansard cannot record it, visibly moved, not least because the Minister has shot my fox.

As members of the Committee will recall, I negotiated with the Clerk as to how to force a Division on my amendment. The Clerk, as ever, explained that, for technical reasons, I would have to force a Division on amendment No. 18 before forcing a Division on amendment No. 34. I was about to start my remarks by telling the Minister that I wanted to divide the Committee on the amendment; it is so reasonable that it is inconceivable that the Government Whip would permit her not to instruct her Back Benchers to support it. Now she has said that she finds it helpful and has suggested that she might allow me to re-table it on Report so that she can accept it. I shall not press it to a vote today.

10.30 am

Serious matters are involved today, and the Minister must have listened with great care—as the Government Whip certainly did—to the wise words of the hon. Member for Stoke-on-Trent, Central. The hon. Gentleman has been a Minister; he has been in govt, as have you and I, Mr. Conway, and he knows that what he said is correct. In legislation one cannot rely on the self-evident reasonableness of one Minister; legislation must be made fireproof against abuse, which may come in many forms. Although I saw 14 DTI and Home Office officials around the Room stiffen and thrust a piece of paper towards the Minister—

The Chairman: Order. I dislike interrupting hon. Members in full flow, but this is the second time that the hon. Gentleman has referred to those people. I do not see anybody else in the Room but members of the Committee; nor does he.

Mr. Mitchell: I am grateful to you, Mr. Conway, for keeping me on the straight and narrow. Any official advice that might be given to the Minister in respect of the words of the hon. Member for Stoke-on-Trent, Central is bound to say, ''Resist'' or, ''Beware of an apparent agreement between Sutton Coldfield and

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Stoke-on-Trent''. None the less, the hon. Gentleman is correct: Members of Parliament should be enormously careful about granting open-ended powers in such areas.

The Minister makes great play of the fact that the Secretary of State will have to authorise such an investigation, but it is extremely likely that almost every time the Secretary of State is asked to authorise, he or she will do so. If I remember rightly the comments made in the other place, the Minister there conceded that that was virtually certain to be the case.

The provisions that we seek to pass into law today mean that someone will not be told why they are being investigated, because the Minister resisted those amendments. Officials will not have a greater burden of certainty imposed on them before they make their inquiries, because those amendments have been rejected. Officials will be able to stay as long as they like—one can imagine officialdom sitting with folded arms, saying, ''Until you tell me what I want to know, I'm not going to move.'' I sought to win the Minister's support by mentioning the domestic circumstances into which an official might enter. The threat that an official could stay for a long time, putting undue pressure on a director being investigated, is real.

The Minister said blithely that we must not be in the business of imposing too many limitations on the powers, but I simply want to impose some limitations on those powers. It is our constituents who will be investigated by an over-mighty bureaucracy and investigatory regime, and that is wrong.

I shall withdraw my amendment, but I give notice to the Minister that I want to test the view of the House of Commons on Report to see whether the majority of our colleagues believe that the powers as drafted are excessive and go beyond what Parliament should permit of investigators in pursuit of our constituents, that the powers are unbalanced, and that they need to be amended. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 ordered to stand part of the Bill.

Clauses 22 and 23 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 24

Community interest companies

Brian Cotter (Weston-super-Mare) (LD): I beg to move amendment No. 41, in

clause 24, page 28, line 16, at end add—

'(c) a charity may become a community interest company.'.

The Chairman: With this it will be convenient to discuss the following:

Amendment No. 42, in

clause 24, page 28, line 17, leave out subsection 3.

Amendment No. 35, in

clause 24, page 28, leave out lines 17 to 18 and insert—

'(3) Notwithstanding the purposes for which a community interest company is established it—'.

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Brian Cotter: I am pleased to move the amendment on behalf of my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) and myself. We are talking about an important subject, to which we have already referred: community interest companies. My colleagues and I are engaged on the issue, and are supportive of community interest companies, but I wanted to raise a particular point. The amendments would remove the provision that states that charities cannot become community interest companies and would instead allow them to choose that legal form if they so wished.

As my noble Friend Lord Phillips of Sudbury noted in the House of Lords, clause 24 states:

''A community interest company established for charitable purposes is to be treated as not being . . . a charity''.

As Lord Phillips pointed out, that is something of a paradox, because a body established for exclusively charitable purposes and operating exclusively as a charity is prevented from registering as a community interest company.

The concept of a charity has always been defined by an organisation's activity and purpose rather than its form. That fundamental point is enshrined in charity law and has in the past given charities the necessary flexibility to adopt the most appropriate form to perform their work. Preventing a charity from choosing to become a community interest company will only create confusion in the public mind about the differences between each structure.

The Government claimed in the other place that they would not accept such an amendment, on the grounds that it would be of little use to charities, which would not wish to use the new form as it would require them to comply with additional regulatory requirements. None the less, it should be for a charity to choose which legal form is most appropriate for the execution of its work. It should not be for the Government to limit the decisions of individual charities, which each have different needs and aspirations. As Lord Phillips said in the other place, he consulted two Law Lords, Lord Browne-Wilkinson and Lord Hoffman, on the issue. Both have extensive experience in dealing with charities, and both shared his concerns.

The Government have said that a new legal form for charities will be created: the charitable incorporated company. Under the draft Charities Bill, the Home Office believe that that will

''avoid dual regulation between charity and company law and provide an alternative to the company limited by guarantee model currently used by many charities.''

None the less, the proposal is likely to be utilised by smaller charities that want to operate within the simple legal framework that the charitable incorporated company will provide. Concern has therefore been expressed that the new type of legal form will be of little use to larger, high-profile charities, which may want to use the community interest company form.

It has also been said that grant-giving charities will find it easier if community interest companies can register as charities, as they will find it easier to make

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grants to them—a point that I believe has been raised with Ministers by the Community Development Finance Association.

The Government have claimed that the community interest company form is not designed to be used by charities, but, as was pointed out in the other place, virtually no other legal form is specifically designed for charities. The company limited by guarantee and the company limited by share are both forms utilised by charities, but there is no confusion. For example, a company limited by guarantee that is a charity is still a company limited by guarantee. Why should the same not apply to charities that wish to use the community interest company form?

Allowing charities to become CICs will allow them the maximum flexibility to choose whichever form is most suitable for their work, and will thus help to enhance the value of the new community interest company structure. That will in turn boost the social enterprise sector, as there is a lot of commonality between CICs and charitable work. I commend the amendment to the Committee.

 

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Prepared 16 September 2004