State of the Nation - Charities
Moira Protani
State of the Nation
The New Austerity
• Banks, FTSE 100s, Public bodies, Members of Parliament and
charities
• Public expectations: public benefit, minimal private benefit, the
voluntary principle, no tax avoidance
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State of the Nation
5 Year Review of Charities Act 2006
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Lord Hodgson Review of the Charities Act 2006
Significant changes in the global economic situation since 2006
Charity Commission budget cuts
Lord Hodgson’s recommendations published July 2012, the Law
Commission; the Public Administration Select Committee published May
2013; the Government response published September 2013
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State of the Nation
Public Benefit
• A charity must be established for a purpose set out in the Act and be for
the public benefit – presumption of public benefit removed
• Charity Commission guidance – wholesale delegation by Parliament to
the Charity Commission
• Lord Hodgson recommended no statutory definition of public benefit:
the Select Committee disagreed citing the Independent Schools Council
and the Preston Down Trust cases
• The Act is “critically flawed” and Parliament must legislate
• The Select Committee said repeal the removal of the presumption of
public benefit and the Charity Commission’s statutory objective of
promoting public benefit
• The government supported Lord Hodgson
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Charity Tribunal
• Some (but not all) decisions can be challenged or reviewed
• Supposed to be cost effective for litigants in person – the Tribunal had
failed?
• Lord Hodgson said to extend rights of appeal on legal decisions and
rights of review on other decisions. Not accepted by Select Committee
but agreed by the government
• Over reliance by the Charity Commission on Charity Tribunal?
• “Abdication of responsibility” and “expensive, time consuming and
unjust way to test the law”
• The government disagreed with the Select Committee – the whole
purpose of the Charity Tribunal was to facilitate development of charity
law
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State of the Nation
The role of the Charity Commission
Friend or Policeman?
• The Charity Commission’s statutory objectives
• “Too vague and aspirational” said the Select Committee
• Focus on regulatory role and preventing use of charities for tax
avoidance – The Cup Trust.
• Parliamentary Public Accounts Committee
• Use of charities for tax avoidance purposes exaggerated?
• Select Committee Report more balanced
• If the Commission is not to receive additional funding for regulatory
activities Ministers must accept that the Commission’s role will be
limited. This was accepted by the government
• The Public Safety Trust
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State of the Nation
Fundraising
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Self-regulation
Failure to give the public confidence – eg Chuggers
Charities Act 1992
Charities Act 2006
Cost of regulation by Charity Commission estimated at £4 million per
annum plus start-up costs
A balance to be struck between regulation and cost to the public
Self-regulating bodies on notice – 5 years to improve – Select Committee
If regulation becomes necessary charities should pay for it.
Agreed by the government
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Politics and Campaigning
• Political campaigning
• Encouragement of transparency – charities should publish expenditure
on campaigning and political activities in their annual returns
• Think tanks
• New guidance from the Charity Commission
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Fees and Penalties
• Proposal of fee for registration not accepted
• Proportionate and flexible charging of charities who are late with filing
annual returns – agreed by the government
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State of the Nation
Trustee Remuneration and Red Tape
• Lord Hodgson’s recommendation that large charities (income in excess
of £1 million) to have power to pay trustees for their services as trustees
not accepted by Select Committee or the government
• Government interim response – no “easing of the general presumption
against trustee remuneration”.
• Undermines the voluntary principle central to the ethos of the
charitable sector
• Administrative burden of separate annual returns to the Charity
Commission and Companies House to be resolved as a priority
• Recognising devolved power but joined up regulation to be encouraged
between the different jurisdictions
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Governance
Lord Hodgson
• Trustees to serve no more than 3 terms of no more than 3 years each
• If not, explain why in the annual report
Government
• Good practice only
• Whether disclosure is appropriate to be decided between the
government and the Charity Commission
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More reporting obligations
•More detailed annual return
•Trustee remuneration
•Membership of Fundraising Standards Board
•Working with commercial participators
•Qualified accounts?
•Trading subsidiary information
•Policies e.g. risk management, investment, conflicts of interest,
complaints handling
•Other regulators
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State of the Nation
More Grief for the Charity Commission
but.....HMRC.....?
• Another review by the National Audit Office – is the Charity Commission
fit for purpose?
• Law Commission
• Registration jointly with the Charity Commission and HMRC–
• A conflict of interests?
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What now?
A stricter tax regime
• Trustees should review their governance thoroughly
• Increased regulatory activity by the Charity Commission, eg the Dove
Trust; Christ’s Embassy
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State of the Nation
What now?
• Charity Commission’s overall reduction in funding will have greater
impact on smaller charities
• Charity Commission’s advisory functions have always been free of charge
– already a loss of focus in this regard
• Greater reliance on professional advisers and in-house expertise
• Help from the charitable sector?
• A change in the mood of the public
• The age old dichotomy for charities
• The new austerity
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