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Baroness David: My Lords, perhaps I may ask the Minister a question. Will they be allowed to continue their course if they are being asked to do an unqualified job, which is something that will interrupt their training and not be worthy of them?

Lord Inglewood: My Lords, the noble Baroness's question is a hypothetical one. The crucial point here is that the way further education is going, as I understand it, means that there is frequently considerable flexibility in how the learning is presented. We understand that in many cases it is possible, if there appears to be a clash, to find a mutually satisfactory outcome by negotiation.

As I said, the current rules are becoming increasingly difficult to administer, and we have faced calls from all sides for greater clarity in the arrangements. That is what we shall achieve with the JSA. People claiming JSA will be able to enrol on FEFC-funded courses of up to 16 guided-learning hours per week. There will be no such change in higher education, where the full-time/part-time distinction is still recognised, and will continue. There will be no restriction on private study, provided that people remain available for work. I hope that that confirms the point raised by the noble Baroness, Lady David.

The debates over those changes, especially in earlier stages of the Bill in another place, have been characterised by misunderstanding, so let me make it clear: this is not an exercise in cutting provision. The same number of unemployed people (about 80,000) will be studying and claiming benefit. On the contrary, it introduces a clear and workable regime, and should be welcomed as such.

The noble Earl, Lord Russell, and the noble Lord, Lord Henderson, expressed concern at the use in the Bill of delegated powers. The House takes very seriously its responsibilities for scrutinising the use of delegated legislation, and it is right to do so. But I think that it will by now have become clear to your Lordships that the Bill deals with extremely complex and detailed issues—issues which it would be inappropriate to draw into primary legislation.

It has long been recognised that the nuts and bolts of social security rules should be issues for regulation and not primary legislation. Social security legislation needs to be flexible to cope sensitively with changes in circumstances; with changes in operational requirements; with a labour market of many facets. That can best be done through secondary legislation.

The Select Committee on Delegated Powers will, I am sure, examine in great depth the Government's proposals for secondary legislation. We have given the

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committee a very detailed account of the Government's policy and our reasons in each instance why we believe secondary legislation is an appropriate vehicle. Where our intentions still remain unclear from the face of the Bill we will of course explain our policy proposals in Committee.

Very many of the powers in the Bill carry across provisions in the 1992 Social Security Acts. As far as possible the Bill proposes the same procedures for control and scrutiny of delegated powers. It seems to the Government sensible to follow what Parliament has found satisfactory in the past. The Bill therefore ensures that all regulations made before the allowance is payable will be subject to affirmative resolution. I am sure that your Lordships will wish to consider the regulations when they are brought before you.

Pilots brought forward under the new power in the Bill to run pilots of regulations under JSA and the income-related benefits will also be subject to affirmative resolutions. I believe that it is right that your Lordships should be given the opportunity to examine and debate on each occasion the Government's proposals under that unprecedented power.

Earl Russell: My Lords, I am grateful to the Minister for what he has said about the opportunity to discuss. Will he tell us how the House can give or withhold its consent?

Lord Inglewood: My Lords, there is a convention on how those matters are dealt with. Let us see what the memorandum says, and then, if noble Lords wish to raise any different matters, that may be the appropriate moment to do so.

The Bill is a comprehensive, coherent and innovative measure, as my noble friend Lord Trefgarne said. It is part of a wide-ranging reform of labour market and benefit measures. It is comprehensive because it does what no government of either party have attempted for 80 years. It creates a single system of support for unemployed people while they look for work. Where there have been two benefits, there will be one. One benefit with one set of rules means clarity and simplicity. It means better service for unemployed people.

The Bill is coherent because it is informed by an approach which the Government have applied with consistency and conviction. We have created a climate in which businesses can flourish and so create jobs. We have cut down on the kind of public spending which costs jobs. We have liberated enterprise and the ambition of individuals. We have promoted active labour market policies to increase the responsiveness of the workforce to changes in the world of work and to help people back into jobs.

We should not forget that recently the European Community pointed out that in our country it is no job rather than low pay which is at the root of poverty. The results are clear to see. Unemployment has fallen by over 600,000 over the past two years and is now lower than in all major EU countries.

As my noble friend Lord Dean of Harptree pointed out, the Bill is innovative in the incentives it introduces to encourage jobseeking and the take-up of work. In

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doing so it creates real winners: the 150,000 winners who will benefit from the back-to-work bonus; the 120,000 winners who will be covered by the NICs holiday; the 200,000 extra people who can take advantage of employment on trial; those who will be guaranteed their existing rates of housing benefit and council tax benefit in the first weeks of starting a new job; those whose partners will now be able to work up to 24 hours without the work affecting the family's benefit.

Our proposals for jobseekers will help Britain to generate more jobs. They will help unemployed people to find work; they will strengthen Britain's economy and will give better value for taxpayers' money. They will be welcomed by those who want to see a prosperous economy, the only source of all benefit payments, and who want to help unemployed people achieve their main goal: a job. I commend the measures to your Lordships and I invite the House to give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

Charities (Trustee Investments Act 1961) Order 1995

6.10 p.m.

Baroness Blatch rose to move, That the draft order laid before the House on 13th March be approved [14th Report from the Joint Committee].

The noble Baroness said: My Lords, this order would use powers in Section 70 of the Charities Act 1993 to modify the effect of the 1961 Act in relation to charities. Central to the purpose of the order is the importance of achieving an appropriate balance between risk and return in relation to a charity's investments. What is at issue here is the best use of charities' assets; in the first instance by way of investment so as at some time in the future to secure effective work by charities. Also relevant are questions of accountability and safe keeping where possibly substantial assets have been donated by the public and are being held on trust by the charity.

Trustees are subject to important obligations of care in relation to such assets and must in general avoid risk. When the Trustee Investments Act was enacted in 1961 it was, therefore, an important liberalising measure, allowing trustees to invest more freely. In particular, it introduced the classifications of "wider-range" investments, such as equities, and "narrower-range", such as government gilts. The Act requires that where trustees divide assets for investment they must do so equally—50:50—into the two classes. The Act also requires trustees to obtain and consider proper investment advice and to have regard for the suitability of investments and the need for diversification.

We recognise that there has been concern in relation to the restrictions these provisions have imposed for charities. In addition, professional investment advice has now been strengthened by regulation under the Financial Services Act 1986. Concerns in relation to charities were voiced particularly by the deregulation task force on charities and voluntary organisations, which reported in July last year. The task force review was an important exercise and the Government have responded very

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positively to its many recommendations. The number of recommendations has meant that to give proper consideration to each we have had to prioritise the action that we take. Already we have made some changes to the Charities Acts of 1992 and 1993 through the Deregulation and Contracting Out Act 1994 and have taken careful account of their relevant recommendations in provisions we brought into force last month and in an important consultation document issued recently.

The deregulation task force also recommended a modification to the effect of the Trustee Investments Act in relation to charities and, indeed, other trusts. The Government accept the case for change. This order would mean that, where charities divide funds for investment in pursuance of the 1961 Act, three times as much money would be invested in typically higher growth, wider-range investments, compared to more secure, narrower-range investments—a change from a 50:50 split to 75:25. This is a good and worthwhile measure.

I can also inform your Lordships that last week the Treasury issued a consultation document inviting views by the end of June on the proposition that a similar change should be made in relation to trusts generally, using powers in the Trustee Investments Act.

The present order does not meet in full the recommendations of the deregulation task force, which proposed a change to a 90:10 split and suggested that consideration should be given to allowing further investment powers beyond those permitted in the definition of "wider-range" powers. I hope that your Lordships will recognise that the current order is, at the least, a substantial move towards that recommendation. The Treasury proposal for further reform is another step in that direction and in that case is the maximum extent to which the relevant modification can be made without amendment to the primary legislation itself.

Further amendment is, of course, possible in principle. I am reasonably sure that those who may wish to argue for such change will continue to do so. However, at this stage, the Government's view is that a change to 75:25 is the one they consider it right to make. In relation to this draft order, there is the additional reason that there is a logic in keeping the rules for charities in line with what is proposed, and it is the maximum possible under the law as it currently stands in relation to trusts generally.

Charities which consider that there is a particular need for wider investment powers in their individual circumstances are, of course, able to apply to the Charity Commission seeking a modification to their trust deed by a scheme. Investments by charities in common investment funds do not need to be taken into account for the purposes of any division into wider and narrower-range funds under the 1961 Act. Perhaps I may allay any fears which charities might have and say that this order would not compel funds long since divided 50:50 to be re-divided if, over time, more than 75 per cent. of their current value were now in wider-range investments. On the other hand, Section 70(2) of the Charities Act 1993 means that, once this

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order has been made, a charity will be able to make one further re-division of funds previously divided 50:50 should it wish to take advantage of the 75:25 split.

Your Lordships may also wish to know that the power in Section 70 of the Charities Act 1993 enables this order to apply not only to England and Wales but also to Scotland. I am pleased to say that, with the agreement of my right honourable friend the Secretary of State for Scotland, the order will also apply there.

I have emphasised the need for a balance in relation to investment and the fact that the Government have accepted the case for considerable change. I recognise that some would like to go further, but I have explained why we are not at this stage persuaded that that would be justified. I invite your Lordships to agree on the current proposals set out in the order.

Moved, That the draft order laid before the House on 13th March be approved [14th Report from the Joint Committee].—(Baroness Blatch.)

6.15 p.m.

Lord McIntosh of Haringey: My Lords, the House will be grateful to the Minister for introducing the order with a good deal more seriousness than it was introduced in another place last week. There the Minister introduced it in a rather cavalier manner and I do not believe that he knew what would hit him. My honourable friend Alun Michael, who had done his homework on the subject, pointed out a number of grave deficiencies in the order. The order is not in itself wrong but it contains inadequacies which Mr. Baker had not considered possible. I am glad to see that today the Minister's brief has been substantially amended to take account a number of the points made by my honourable friend.

Perhaps I may make clear the extent to which the order is inadequate. The 1961 Act was, in its time, a measure of liberalisation. It gave a degree of freedom to charity trustees to balance their portfolios between equities and gilts and between wider and narrower-range investments. However, by 1982 the Law Reform Committee had described it as being no longer a matter of liberalisation but of severe restriction on the ability of trustees to maximise the return on their investments as they are required to do by law. That was confirmed in 1989 by a Government White Paper. It was confirmed again in 1990 by a National Audit Office report and again in 1991 in the debates on the Charities Bill. Finally, as the Minister reminded us, the deregulation task force described the inadequacies of the 1961 legislation in considerable detail. It made detailed recommendations as to how it should be changed.

As the Minister reminded us more successfully than the Minister in another place did there, the scope of the order is more limited than might appear. First, it applies only to charitable trusts and not to charitable companies. Secondly, the disposition of investments which have already been made, and which have resulted in a balance of investment different from the 50:50 provided in 1961 or the 75:25 provided under this order, will not be affected by the order because those investments can remain.

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Thirdly, charities—and this is true for many of the larger charities—may have discretion in their constitutions to make investment activity outside the scope of the order. Even if they do not have discretion in the constitution, they may obtain a scheme from the Charity Commissioners to secure exemption. Therefore, on the whole the order will apply only to a minority of charities or perhaps a minority of charity funds, although it will probably apply to a majority of the smaller charities.

But let us think of the opportunities that are being missed in bringing forward this petty little order now instead of taking the issue seriously and trying to give charity trustees the opportunity and the duty to maximise the return on their investments. The Minister reminded us rightly of the changes that have been made in the role of investment advisers under the Financial Services Act 1986. But the 1961 Act takes no account, of course, of the provisions of that Act. Investment advice—I am looking at the Good Trustee Guide produced by the National Council of Voluntary Organisations—may be given by accountants, bank managers, stockbrokers, members of the charity staff or one of the trustees. That provides no protection.

The Good Trustee Guide reminds us that trustees who give investment advice should consider the extent of any professional negligence liability which they may incur by doing so. Would not this have been an opportunity to make sure that the giving of investment advice to charities was codified; that the advantages of the Financial Services Act 1986 were made available to charities; and that they should be required to seek investment advice from those who are approved to give it under the 1986 Act?

I turn now to what is called the measure of liberalisation. Why have the Government not taken the advice of those bodies to which I referred as reporting on the 1961 Act and their deregulation task force not merely to change the percentage from an arbitrary 50:50 to an arbitrary 75:25 but by removing altogether the restriction? I shall not go into the same detail as Alun Michael. I suspect that he was moving into the arguments of Goneril and Regan about King Lear's need for a train of retainers:

    "What need you five and twenty, ten, or five?"

Seriously, there is no magic in 50:50 or in 75:25. Good investment advice, provided by someone qualified to give that advice and who is regulated by the Financial Services Act to give it, could well be different for different charities and need not follow the same percentage pattern. Therefore, in that sense too, the order is inadequate.

Above all, after the experience of Barings, we know that there is an urgent need to prevent charities investing all their resources in a single institution, even a single bank, as my noble friend Lord Chandos reminded us last week. That opportunity too has been missed.

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Of course we shall not oppose the order. It is no worse and very, very marginally better than the original Act. But it is not the order which should be before your Lordships today.

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