| Companies (Audit, Investigations and Community Enterprise) Bill [Lords]
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The Chairman: Before I call the next speaker, I should say that I intend to let the debate on the amendments range widely to cover the clause, on the basis that we will not then have a clause stand part debate. If that does not inconvenience the Minister, it might help to facilitate proceedings.
10.45 amMr. John Battle (Leeds, West) (Lab): Thank you, Mr. Conway, for giving me the opportunity to say a few brief words, because I am enthusiastic about the idea of the new instrument of community interest companies reaching the statute book. That sentiment is shared on both sides of the Committee, so I am keen to ensure that we do not make obstacles, which may not really exist, so insuperable that we cannot move forwards. I notice that we are already slipping into using acronyms—I am suspicious of our language being reduced to text language—and referring to CICs as ''kicks''. To use a most appalling pun, I believe that the instrument could ''kick-start'' local economic development. More seriously, we should get away from the acronym and focus on the purpose of the instrument. The purpose is to allow ordinary people to invest a modest amount of money in a company that can provide goods and services locally, so that the benefits will be felt locally. My neighbourhood of west Leeds loses £18 million a year through goods and services being bought elsewhere. We could reinvest that money in our neighbourhood to take the boards off of boarded-up shops and reopen them. We could use the provisions of the Bill to help with the care of the elderly, the sick and youngsters. I want the provisions to have a real practical input, and not be just a financial instrument or just another piece of law. I shall briefly comment on the remarks by the hon. Member for Weston-super-Mare (Brian Cotter), because I know that he appreciates the purpose of the new instrument. Having read the Hansard record of the debate in another place, I believe that there is a Column Number: 111 danger that the Law Lords can become so obsessed with reconciling law that they miss the point. I share the concerns raised on the Floor of the House about the interface with charity law. I worked for 10 years in charity law trying to separate out which activities counted as charity and which counted as educational. However, I cannot support the hon. Gentleman's amendment and I think that we are making a mountain out of a molehill.More reform of charity law will come. However, the charity commissioners wrote in support of the Government and I read out the letter on the Floor of the House. They say, ''Don't turn charities into community interest companies, but there is nothing to stop a charity setting up, with others, a subsidiary that is a CIC.'' The current remit of the Bill does not dilute the practical effects that the hon. Gentleman highlighted. We should not hold up the Bill by arguing whether we should wait for charity law to be reformed later—when that comes, it will be helpful. There will always rightly be a complex interface between charity law and business activity, because both areas are dynamic and growing, but there should not be a problem. I shall make three quick points to the Minister on my own behalf. First, I welcome the fact that in setting up the regulations, and in the conversations that the Government had with the sector, the interested voluntary bodies that have campaigned for new social enterprise instruments will be included in the ambit of regulation to work with the regulator. I hope that she can confirm that, because that is most welcome. Secondly, I know that most of the detail will be included in detailed regulations. When will they be published? I look forward to that, so that we can work with the practical instrument as soon as possible. Finally, can I be assured that when CICs are set up, they will get a fair wind when it comes to competing for contracts and tendering? Only 20 years ago—it is now history—I was involved with setting up co-operative businesses. It may surprise hon. Members, even Labour Members, to know that the most difficult thing was to convince the Co-operative bank, of all people, to accept a workers' co-operative as a viable business. That was not because the co-operative did not have a good business plan; they had a damn good business plan. However, the bank could not understand the complex nature of a co-operative company's structure, or the fact that, rather than one person being involved, all members shared in it. We are well beyond that stage now, I am glad to say. However, I hope that lack of awareness of the slightly more complex community structure of community interest companies does not deter other businesses, local authorities and public bodies from recognising them, respecting them and treating them fairly. The new companies will need to be treated as good real businesses that can bid for contracts and tender on a level playing field with other private businesses. If we reach the point at which that is the case, we will have an instrument that allows local communities to invest Column Number: 112 in their communities, and when they do, that investment will remain in the communities. Even if a scheme goes belly up after a few years—and of course, some businesses do—all the assets will remain in the community.We are in a win-win situation with this proposal. I hope not only that it will become law, but that the Government will give it publicity and advertise it as a good thing for local communities. We should promote this instrument of community economic development and ensure that it is used. Mr. Mitchell: I am pleased to be able to speak to amendment No. 35, which is designed to be helpful to the Minister. Its purpose is to make it clear that a company established as a CIC cannot be a charity. That is, as I understand it, the current position in law, but the objective is achieved in the Bill by drafting that is so convoluted as to obscure the point. Anyone reading the Bill to the effect that a company established for a specified purpose
Mr. Conway, you kindly said that we could have a slightly wider debate on the amendments in order to avoid the need for a clause stand part debate, and I am most grateful for your ruling. In the interests of the timing this morning, and of getting through the amendment paper, I do not intend to suggest a general debate on CICs, although I very much hope that we will be able to have one on Report, because, as the right hon. Member for Leeds, West (Mr. Battle) said, this is a matter of wider interest to a number of hon. Members. The hon. Member for Weston-super-Mare asked whether a CIC could be a charity. I am agnostic on that point, although I think that the Bill should make the position clear. As I understand it, a CIC can have a relationship with a charity or, possibly, a charitable incorporated organisation. That means that if the Government intend us to be clear that a CIC cannot be a charity, they will have to look quite carefully at this legislation to ensure that it is enforceable, because of the arrangements that I have described. I want to make three further points. I agree with the right hon. Member for Leeds, West about the use of acronyms. He will have noted that throughout these proceedings I have never referred to a ''kick''; I have always referred to either a C-I-C or a community interest company. It is quite important to distinguish this organisation, because in a moment I shall say a few words about another organisation that the Government are seeking to establish—the charitable incorporated organisation, which will arise under charity law. If there is a Charities Bill in the next Session, that form of organisation, too, will be established, and although the Minister made a good attempt on Second Reading to describe the difference between the two types of organisation, it will defy most Column Number: 113 of our constituents. The organisations are closely related in intent in so many ways that great confusion will be caused.My submission to the Committee is that the Government would have been wiser to wait until the House could see the shape of the charity legislation—draft legislation is being considered by the Joint Committee—before proceeding with CICs. That is the same point as was made about part 1 of the Bill: Opposition Members regret that the Government have produced a minnow when they should have produced the company law review and the major company law changes that we have been awaiting. Similarly with CICs, it would have been better to wait until the House could see the new Charities Bill and consider CICs in that connection. I also think that the Minister will need to demonstrate that the raft of new legislation proposed is necessary. On Second Reading I drew the attention of the House to the Industrial and Provident Societies Act 1965. It is clear that the distinguishing characteristics of a community interest company, which are outlined in paragraph 161 of the explanatory notes, are very similar to those of an industrial and provident society set up under the 1965 Act. For example, an industrial and provident society for carrying on any industry, business or trade can be registered if its business is conducted for the benefit of the community. Clause 33 says that a CIC
Clauses 28 and 29 allow regulations to prohibit or limit the distribution of assets by CICs and deal with the distribution on winding-up of a CIC. The Industrial and Provident Societies Act says that rules must prevent surplus assets from going to members, and the Bill promises, with regard to CICs, regulations that limit the amounts that can be paid to members in a winding-up. Not only is the Bill premature, as this proposal should have been examined in the context of the draft Charities Bill, but much of it may be unnecessary. Its aims could have been accomplished in a far simpler legislative way. I must point out to the right hon. Member for Leeds, West that the difference between the CIC and the CIO, which he understands—as you will, Mr. Conway, because of your expertise in the charitable sector—will not be understood by many others. The Government will have to return with a clearer exposition of the aim of both those two instruments. The right hon. Gentleman was right to point out that we have not seen the secondary legislation regarding the CIC. As for the CIO, those considering Column Number: 114 the draft Charities Bill have seen nothing, because there are no regulations for us to see. We are stabbing in the dark. I hope that the Minister will hear the words of the right hon. Gentleman and ensure that we are given sight of the secondary legislation, which, so far, we have been unable to review.
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| ©Parliamentary copyright 2004 | Prepared 16 September 2004 |
