Work of the Charity Commission in 2008-09 - Public Administration Committee Contents

Examination of Witnesses (Questions 1-)

DAME SUZI LEATHER AND MR ANDREW HIND

10 DECEMBER 2009

  Q1 Chairman: Good morning everyone. Let me welcome the Charity Commission, in the form of Dame Suzi Leather, who chairs the Commission, and Andrew Hind, who is the Chief Executive. It is always a pleasure to see you. As you know, it is our job to keep an eye on what you are up to and, if I can say so, you do make a point of reporting your activities to us on a regular basis, for which we are grateful, and we have, at least annually, the chance to ask you some questions about it. Thank you for your letter in advance of this meeting and all the information that you sent us. Would you like to say anything by way of introduction?

  Dame Suzi Leather: Thank you very much indeed for that introduction. We are very pleased to be here as well. I think since we last met we have had some very significant achievements: we have strengthened our compliance work; we have improved its performance, its timeliness and its impact. Registration times for new charities are down again; more charities than ever are filing their accounts on time. On public benefit, we published some research two weeks ago which shows high levels of awareness and understanding of the public benefit requirement. There is still more to do on that, but, I think, overall, it is very positive. So we think that we have performed well in a difficult climate. For the future, it is clear that all political parties envisage an important and increasing role for the charity sector and, clearly, that has implications for the independent regulator, because I think our role in upholding the integrity, the independence and maintaining public trust and confidence in the charity sector will continue to be very important.

  Q2  Chairman: Andrew, do you want to add anything?

  Mr Hind: No, I have nothing to add, Chairman. Thank you.

  Q3  Chairman: Could I start with, broadly, this compliance area? I know that we are going on to talk about other things, but your key role is this regulatory role and the compliance role.

  Dame Suzi Leather: Yes.

  Q4  Chairman: I have tried to read some of this material. You mentioned just now that you were improving the reporting on time of charities, but I do see from the figures that nearly a quarter of charities are still failing to submit their accounts on time, and "on time" means, if I am right, within 10 months of the end of a year. That does seem a very high figure. Should not the regulator be doing better than that?

  Dame Suzi Leather: I think, overall, in fact, the proportion of the sector's income for which we hold the most recent accounts and annual returns is actually rather high. The target is 98%, but what we are actually achieving, both for accounts and annual returns, is also 98%. So in terms of the proportion of income that we have up-to-date information for, it is very high indeed. You are right that we do not have 98% of charities reporting their accounts on time—that figure now is about 77%—but that does mean that the remainder are not. The vast majority of the remainder are very small organisations: they are the organisations which do have to report to us but are rather small. So that is the difference between having the actual amount of the income and the overall numbers. Andrew, do you want to say more?

  Mr Hind: We absolutely share the concern, Chairman. Suzi has explained some background to it. I think what I would like to say is that this is on a very fast-moving upward trend. About six or seven years ago the figure was around 60% and, in fact, there was a Public Accounts Committee discussion about this, something like 10 years ago, where the issue was highlighted and the Commission has done an awful lot since then. One of the constraints on this, from our point of view, is that, unlike Companies House and unlike a number of other regulators, we do not actually have sanctions that we can impose to ensure that charities absolutely do meet that ten-month filing requirement—we cannot fine charities if they are late—but what we have done (and, you might remember, we were beginning to brief the Committee on this a year ago) is redesign our public register so that charities that are late in filing, that do not meet that 10-month deadline, are actually now bordered in red for everybody to see in public, and, as Suzi said, that is already leading to an increase in submission rates. So we are up to 77, 78, touching 80, and I think that is going to go higher.[1]

  Dame Suzi Leather: That is a really good example of the much-vaunted concept of "nudge" in regulation. The simple mechanism of putting a red or a green border around the accounts on the register for particular charities has focused minds rather wonderfully.

  Q5  Chairman: Perhaps I can broaden this a little bit. Everyone is supportive of the charitable sector but, at the same time, people who give money to charities want to know that they are giving money to reputable organisations that are properly run, properly accounted for, and so on. When I went to your report on compliance what I wanted to try and find out was could I see what percentage of the charitable sector seemed to be running into some kind of irregularities. I find it difficult. There are tables of figures here about numbers of investigations, but what I just cannot find is the figure which tells me in how many of the total of investigations you upheld complaints. You say in your report on compliance, "Fraud, theft and significant loss of funds are also common features." I wanted to know what that meant. How common in the charitable sector, is fraud, theft and significant loss of funds, where can I find that and, more importantly, how can someone who wants to give money to a charity be sure that they are not giving money to a charity that is engaged in all kinds of irregularities?

  Mr Hind: A number of quick responses to that, Chairman. What we have tried to do on page 35 of this report is give an overview of the number of cases we have been engaged with, and I think that is a pretty good proxy for the extent to which there is difficulty and abuse going on in the sector. There are 180,000 charities. What page 35 of the report you are talking about says is that we looked in detail at 1,500 complaints that came to us during the course of the year, we assessed them and, on the basis of what we saw and the evidence we saw, we opened 168 investigations of which 19 were formal inquiries using our powers. So less than 200 cases were serious enough for the regulator to actively engage. I think that is a pretty good approximation of the extent of the problem in the sector of some charities being abused, either for the purposes of fraud, in a very small number of cases terrorist infiltration and money laundering, in a very small number of cases the abuse of vulnerable beneficiaries. We take every one of those cases very seriously, but I think the public can have confidence that they are pretty isolated in the overall scale of the activity of the sector.

  Q6  Chairman: All those figures come from complaints, do they?

  Mr Hind: No, not necessarily. They come from a whole series of sources. They certainly do come from complaints from members of the public, from people within charities themselves, from the media nationally and locally, from Members of Parliament, but they also come from our casework and from our monitoring of what is going on in the sector. So we are very much on top of that. This is a new development for us. The Back on Track report summarising our compliance work: it is only the second year that we have published this volume, and the reason we did it was to try to answer for the public at large and everybody interested in the sector exactly the question you have asked, which is how much is going wrong, why is it going wrong, what kinds of things are going wrong and, critically, what are the lessons that the regulator is pointing up for every other charity to take notice of? This is not just a matter of record of what has happened in the past in terms of our compliance work, it is also a critical learning document for every trustee, and what we do with this is circulate, through our newsletter, and so on, to every trustee, the highlights of it, so that the lessons can be learned about how you protect your charity from this kind of thing happening.

  Q7  Chairman: That is very useful. So you are really saying it is certainly less than one per cent of the charitable sector?

  Mr Hind: Yes, very much less than one.

  Dame Suzi Leather: I think also, to go to your point about what does the public know, when we open an inquiry that information is in the public domain.[2] When we put interim managers into a charity we put that onto the website so that the public can find out what is going on, and, of course, when we have finished an inquiry we publish those documents.

  Q8 Chairman: Can I ask you one more question, again, on the same issues about compliance. You give some very nice case studies in your report of organisations that you have looked at and found to be deficient in a variety of ways, and then you offer lessons for the sector. Some of them you name, though, and some of them you do not name, and I do not really understand why, having named all the previous ones, we suddenly get "a faith-based charity" and then a note says, "We have not named this charity as we are working with its umbrella body to produce a full child protection policy." The charity, we are told, is a branch of a worldwide religion, and then some pretty nasty thing happened which you had to investigate, but I do not understand why we cannot know what this branch of the worldwide religion is if we know all the other ones.

  Dame Suzi Leather: My understanding of that (and we will have to correct this subsequently if it is not true) is that the information on and name of that charity will be in the public domain when we have concluded that part of our work.

  Q9  Chairman: Is that the answer? You tell us here what you have been doing and what you required of the organisation. As it is a factual thing that has happened and you have investigated and you have reported on it in your report, I simply do not see why you would not say, along with the other ones, who it was.

  Mr Hind: I think if we could, Chairman, we will give you a full analysis of that after the meeting. I think there may be some child protection issues in here and a concern about the fact that the identity of young people involved needs to be protected, but I will check that and make sure you have the full issue.

  Q10  Chairman: I understand, of course, you are not going to name them, but I do not understand why you cannot even tell us what the branch of the worldwide religion is that this issue relates to?

  Dame Suzi Leather: Let us look at this. I clearly get the message.

  Chairman: Perhaps you can think about it in the next half an hour or so and perhaps you can think of a reason why you have not told us. Gordon.

  Q11  Mr Prentice: I am interested in those charities that are raising money for a purpose which is outside their charitable objectives. I wrote to you, Mr Hind, about this and you told me that between 26 November 2008 and 25 November 2009 there were 33 cases which involved charities acting "outside their objects or misapplying charitable funds". I am quoting back to you your own words. What happened to those charities? What happened to the 33 cases where they were raising money, basically, under false pretences?

  Mr Hind: Each case will have been looked at on its merits. If there were cases of members of the public giving funding to a charity on the basis of misrepresentation we would ensure that funding given in those circumstances was recovered.[3] In most cases trustees will recognise the concerns that we are expressing, they will change their behaviour, they will ensure that they either act only in accordance with their objects in the future or, if we think there is merit in the case, agree with us an extension to the objects.

  Q12 Mr Prentice: You said earlier you did not have any sanctions—you used the little red box and so on—but for people who are raising money under false pretences, presumably, there are criminal sanctions: people are prosecuted, put behind bars.

  Mr Hind: Absolutely.

  Q13  Mr Prentice: Has anything happened to any of those 33?

  Mr Hind: Mr Prentice, I need to be clear. When I said we do not have sanctions, I was purely talking in respect of the Chairman's first question, which was about charities filing their accounts with us. We do not have sanctions to make them do that. We have a whole range of sanctions to ensure that, where there is abuse of charitable status, where there is fraud, where there is misrepresentation serious things are done about that, including, of course (and there are plenty of examples of this), us passing cases over to the police and trustees are prosecuted.

  Dame Suzi Leather: Actually, in the last month somebody has received an 18-month prison sentence for setting up a sham charity.

  Q14  Mr Prentice: You will know about the case in my own constituency. I am generalising from the particular here, but Islamic Help is based in Birmingham and its main charitable objective is to be able to respond to emergency disasters quicker, but on its website it has been asking for money. It wants £1,050,000 by 10 January to convert an old medical fabrics mill into a giant boarding school for Muslim girls. As you know, the biggest boarding school for girls at the moment is Cheltenham Ladies' College: 650 girls. What Islamic Help wants is a 5,000 place boarding school. I have written to you about this, and I think Islamic Help is operating way outside its charitable objectives. This is from its website. I am assuming you are in touch with them and asking them to return money to all the people who gave money thinking it was for this new educational institution.

  Mr Hind: I am not sure that it would be right for me to engage in a dialogue—

  Q15  Mr Prentice: People are still giving money to this charity.

  Mr Hind: —about the absolute detailed specifics of the case, but, on the general point that you raise, that kind of concern is something that we absolutely involve ourselves with on a robust basis and, if the evidence is that what you say is happening is happening, then we would ensure that something was done about that, yes.

  Q16  Mr Prentice: It says here, and this is from the website: "Muslim watchdog. In this day and age Islamaphobia, women's rights within Islam and other issues brought up against Muslims are one of the mainstream topics within the media all over the world." In its college it is going to have a Muslim watchdog to advise, not the girls, but the sisters. The sisters will be given special training in how to tackle these issues professionally and appropriately.

  Dame Suzi Leather: This is the subject of a current case.

  Q17  Mr Prentice: Yes. I only raise it because people may still be giving money to this charity, Islamic Help, and I want people out there to know that you are investigating it.

  Mr Hind: We are in contact with the charity, Mr Prentice. We will keep you fully informed. As ever, serious accusations get dealt with robustly by the Commission.

  Q18  David Heyes: I think it is now the second year that you have had a 5% budget cut and you are in line for two further years of a similar level of budget cuts. That has got to have an impact on the organisation. Yet I do not pick up from your annual reports or the other documentation that we have seen that that is a great concern to you. I think you would expect the top people in an organisation like yours to be anxious about a cut that has got to be 20-25% overall over a four or five-year period. What are the consequences of that?

  Dame Suzi Leather: Mr Heyes, I can quite assure you, we are clearly aware of the fiscal situation and the difficulties that many public sector organisations and others are in and are going to be in, and I have also mentioned that all parties clearly envisage a strong role for charities in the future, but I would want this Committee to understand that we have already achieved very significant efficiencies and I do not think there is any fat left to trim. We have already achieved significant staff reductions. We have moved our London office to save money. We now have less space in our Liverpool office, our largest office. We have introduced some changes to the way we do things. The take-up of online services has been a notable achievement. We have introduced smarter working throughout our processes and we have outsourced a quarter of our back office functions, but I think it is absolutely clear that any further cuts will affect our core functions, and those core functions are important. As a regulator and a registrar we have a statutory responsibility for registering new charities, for maintaining the register so that the public can see the sort of information that you have been talking about, to ensure that charities only spend charitable funds (Mr Prentice's point) on what they are legally allowed to do, to ensure that trustees are acting in accordance with the law. We have to give authority to changes to many charities. They cannot make those changes, for instance selling land, without our permission. I think we have a very important role in ensuring public accountability of charities, and we have to give advice, and the Hampton Review showed that it is important that regulators are able to give advice. Our worry is that in making those cuts to core services what it is going to be necessary to do is cut that advice to the sector. That may be a necessary cut, but in many ways it will be a false economy because we would be shifting the costs on to precisely the most vulnerable parts of the sector—those small charities, community-based organisations who are the least able to afford lawyers and accountants. So I think we are in a very difficult position.

  Q19  David Heyes: Just to be clear, though, are you talking about anticipating cuts over and above the 5% per annum that you expect in the next couple of years? Do the comments you have just made relate to next year and the year after? You say it will be impossible to achieve the cuts that are scheduled already for you without causing some serious pain.

  Dame Suzi Leather: I think what I am saying is that the cuts we have already made we have had to make because we were cash flat for three years and then we were on minus five for three years. So we have already made very significant changes. Further cuts now (and, of course, we recognise that there are going to be cuts in the next spending round, possibly very significant cuts) will affect our core services. We will not be able to be the same organisation that we are now, able to support the charity sector, which all parties think is very important for the economy.

  Q20  David Heyes: All this against a background of talk about an enhanced role for the third sector, the charitable sector, in service delivery and so on.

  Dame Suzi Leather: What we are saying is there is a contradiction there, yes. I think the achievements we have made have been very remarkable, because our staffing numbers have come down, our budget has been reduced, we have made 16.5% in regulation savings,[4] which is very considerable, and that is taking into account all the changes in the 2006 Act. So we have already done that, is what we are saying; we have already come an awful long way. It is very difficult for an organisation like us to know where to go. We cannot make further cuts without affecting the kind of organisation we are and the kind of services that we can provide.

  Q21 David Heyes: But despite all that, you say (and, obviously, I believe what you say) your salaries budget actually went up last year. We have looked at the average salary that your staff get. I think the increase average is about seven per cent. That is quite a significant increase in individual salaries in an overall salaries budget against that very constrained financial situation.

  Dame Suzi Leather: There is a very good reason for that. We recognised that, in order to be as effective and efficient as we could be, we needed to upskill the capacity of our staff. For instance, in our compliance work in the last few years we have brought in people who come from police, security backgrounds, who have enabled us to be much more effective in this area of our work. Those people, naturally, come in at higher pay bands, so there has been an increase in the wage bill at the same time as the overall staff numbers have gone down, but that is what has helped drive our effectiveness.

  Q22  David Heyes: From what you are saying, the future looks much less up-front help and advice to charities but much more emphasis on compliance?

  Dame Suzi Leather: We are looking with staff, at the moment, at how we can further refine our processes, but we have statutory responsibilities, the most important of which, I think, are to maintain the integrity of the register and our compliance function. Set alongside that, ensuring that charities, for instance, are not being abused by terrorism or other criminal activity, clearly falls into the "must do" category. What it is more difficult to prioritise, I think, is the help and advice, some of it informal, that we give to small charities day by day. Our helpline gets 210,000 calls a year. Many of those calls are from trustees, from small community-based organisations that just want a bit of information, and we can help them with that.

  Q23  David Heyes: The Millbank area is quite expensive. The Labour Party could not afford to maintain its premises there, but you have moved there. What is the reason for that?

  Dame Suzi Leather: Much, much less space. We are saving £1 million a year in the office move that we made this summer.[5]

  Mr Hind: There was surplus space in the Government Estate, Mr Heyes. We have got a sub-lease from the Audit Commission. They had surplus space, as a result of making their own changes and efficiencies, and, I think, from that point of view, it is a sensible move because we moved from somewhere where we had an external commercial landlord to having, as it were, a fellow government department landlord and, as Suzi says, considerably cheaper. I just want to supplement what Suzi said to Mr Heyes about what the implications might be of further funding cuts. The problem with this is that it is, over the medium term, perhaps the relatively short-term, cyclical, because the less advice we can give, both specifically and generally, to charities and to the sector at large about good governance and how you effectively convert public donations into effective charitable outcomes and impact, the more, over time, there are going to be problems in charities, coming back to the Chairman's first point. So although at the moment the proportion of serious issues arising in charities is significantly less than 1% , as we were discussing right at the beginning, I think all the signs are that that would begin to escalate probably quite quickly if we got into a situation that you are asking us to describe where we simply were not able to afford all the advice-giving part of what we do, which is a very important second arm of a modern regulator's armoury following the compliance arm. So it is not just about "nice to haves would have to go". What would happen is that the core fabric of charity, in our view, would, over time, begin to suffer, because the regulator would be insufficiently equipped to do its job properly.

  Q24  David Heyes: A final point on that then. Those are very serious worries that you have articulated, and they are on the public record here, but what are you doing about having that debate with government? They are your funders. Are you giving them this message? What kind of response are you getting?

  Mr Hind: As Suzi said, we recognise that we have to hold two things in balance. We are a non-ministerial government department. I am a civil servant. I have to recognise, and Suzi and the board of the Charity Commission recognise, that public spending is going to be severely constrained in the future under whichever administration comes to power in 2010. So we are not unrealistic and we are not operating in isolation from the rest of economy, but at the same time, clearly, we have got a responsibility, as you are encouraging us to, to be realistic about what we think the future prospects are as a result of funding cuts, and, yes, of course, we are having those discussions with officials and Treasury ministers.

  Q25  David Heyes: Is there a response to it? Is it positive dialogue?

  Mr Hind: I think the response is they recognise what we are saying. We have no indication of what the results will be of that, in funding terms, from 2011 onwards, just as, I think, most other parts of the public sector do not yet know either.

  Dame Suzi Leather: I think it is quite important to understand what our advice and guidance can mean. For instance, the tool kits that were have provided in the last few months on collaborative working and mergers and something we call Big Board Talk have all been tools to help charities as governing bodies, the trustees, face the difficulty, the economic downturn, help them think through what the problems are, and they have been very, very well received by the sector. Big Board Talk was endorsed by the CBI, which was very nice as well. So these are really important things that we provide to help the charity sector itself weather the storm.

  Q26  Chairman: On the office issue that David raised, and I ask this because I do not know the answer to it, but I see that the Commission has four offices in different parts of the country. The question I would ask is: do you need to be in London at all—your regulatory role, I would not think, requires that—and do you need to have four offices in different parts of the country?

  Dame Suzi Leather: If you were designing a Charity Commission from today, I do not think you would place it in four different parts of the country, that is for sure, but we are where we are and moving from where we are and closing an office would be extremely difficult, not only for our staff, but also would be very expensive. So that is the difficult situation we are in. We have other offices because years and years ago it was government policy to empty out. We have a Wales office; we have a Taunton office; the Liverpool office. Clearly, a rational cool look at this would say four offices does not make sense, but we do have four offices. We have done what we can do. We have moved within London and we have downsized very considerably the amount of space we have in Liverpool. In fact, I think about 77% of our staff are already out of London.

  Q27  Chairman: The thought is only that every organisation at the moment has to think quite radically about all these issues.

  Dame Suzi Leather: And, of course, we are thinking radically.

  Q28  Paul Flynn: The eminently sensible decision to have the Wales office in my constituency in Newport West is something that I applaud, and there is room for expansion there!

  Dame Suzi Leather: Thank you.

  Q29 Paul Flynn: While I note nothing is being done about it at the moment, can you tell me why Eton School and Winchester School were exempt from charitable status?

  Dame Suzi Leather: They have been in the list of exempt charities for many, many years. I am afraid I will have to ask a colleague why it was originally the case. I do not think it was our decision.

  Q30  Paul Flynn: Is it anything to do with the number of old Etonians in the Cabinet at the time?

  Dame Suzi Leather: They have been exempt since 1960, presumably since the Charities Act 1960.

  Q31  Paul Flynn: We have no idea why at the moment, and we would be fascinated to receive your reply to explain why this was done.

  Mr Hind: I think, Mr Flynn, I can be absolutely certain about the fact that it would not have been a Charity Commission decision, even back in 1960. It would have been a parliamentary decision to include that as a schedule to the Charities Act, but we will try and dig into history and let you know what the debate was that led to that decision.

  Q32  Paul Flynn: We will live for the moment when we have your reply. The Penylan House Jewish Retirement Home, which I know very well, which is the home of my eldest constituent, May Mandelson, is being questioned because they are not performing their functions. I believe their functions were to provide a retirement home for Jewish people. There are very, very few Jewish people in the Cardiff and Newport areas now. The Synagogues are closed in both areas. There is the famous case, which one of your staff quoted to me, of another charity in Wales which is devoted entirely to the provision of petticoats for fallen women. Understandably, the demand has rather declined in that area as well! If these charities are there and their purpose has really gone, what action have you taken to give them a new role and what is being done in this particular home?

  Dame Suzi Leather: I rather thought that fallen women did not wear petticoats actually! The way that we have helped that particular charity to respond to the demographic situation you have described is, in a sense, quite similar to how we respond to the petticoat situation. Several years ago the charity came to us and said that there was not a sufficiently large Jewish community to be able to be viable as a care home devoted to those people, and so we agreed with the charity that they would be able to extend their charitable objects beyond serving Jewish people and, indeed, now, I cannot remember the figures, but certainly 10 or 12 people, I think, in that home are non Jewish, but the home still runs in accordance with the Jewish faith. But, as you know, charity law holds that charities may charge fees for their services, they may, indeed, charge high fees for their services, but if they do they have to make sufficient opportunity for people who cannot afford those fees to benefit in a material way from the charity's services, and that material way does not simply mean something small, tokenistic, unplanned. We looked at that care home—it was one of three care homes we looked at in the first round of public benefit assessments—and we look at all the fee-charging charities in the round. So we look at how much reserves they have, if they have reserves, what their income is, what their outgoings are—so we look at the capacity that a charity has for doing more—and it is difficult territory making these judgments—as you told us last year, I think, that it was going to be. We have to look at what that charity is managing in the round, whether it is providing help in order to pay fees or whether it is providing other indirect benefit, and see whether that overall package does, in our view, meet the sufficient opportunity to benefit for people who cannot afford the fees. It does not mean that to everybody who comes who cannot afford the fees they have to say yes to, but there has to be a sufficient opportunity; and looking at the income of that charity, looking at its reserves, looking at its policy for supporting people who could not afford the fees, we did not think at the moment that they are demonstrating sufficient public benefit. What we are doing with the organisations (and they were not the only ones—there were two schools as well who could not satisfy us that they were delivering a sufficient public benefit) is that we have given them a period of time, first of all, to say will they work with this, are they committed to trying to show public benefit, then a further period of time to come up with a plan to implement how they will demonstrate public benefit, and then they will be given a further period of time in order to be able to demonstrate that. We recognise that times are difficult, and we have publicly said that this will be difficult for some organisations; it will take time. We have said we would not expect it to take, normally, more than five years in order to do that, but I think it is fair to give charities time to adjust.

  Q33  Paul Flynn: On the question of schools, you lay great store by the number of bursaries that public schools offer and you regard that as their principal benefit, but is it not a disadvantage in many cases to the schools, where the leaders of the schools, the pace-setters of the schools, are taken from them, depriving the schools of the advantages they have from them when they are put into the alien atmosphere of a public school? This is a great disadvantage to many of our comprehensives, who lose some of their best pupils. How is this a public benefit?

  Dame Suzi Leather: I think there are two issues which you have raised there. First of all, as to whether we are putting all the emphasis on bursaries, the answer is we are not putting all the emphasis on bursaries, although I think that some of the press reporting has given many people that impression, but we have tried to correct that impression, with varying degrees of success. The fact is that providing subsidy for high fees is the most direct way in which you can show that you are providing an opportunity for people who cannot afford the fees to benefit, but there are other ways, and we have said that we will take into account those other indirect benefits. What I think would mostly happen, and certainly has happened in all the ones we have looked at so far, is a mixture of the two. So there is some help with the fees and there are some indirect benefits—partnership working with other schools, for instance—and it may be that a school would be able to demonstrate to us, only through that partnership working, those that what we call indirect benefits, that it is bringing sufficient public benefit. This is difficult in case law because there is not actually case law at the moment to support that, but certainly we are open to schools and care homes and other high fee chargers showing us public benefits through those indirect mechanisms. Your second point was really a more general one about the overall benefit or disbenefit of having charitable independent schools, and I do not think that is for the Charity Commission: I think that is for Parliament to decide. What we have to do in making assessments of individual charities is look at what is the evidence of benefits and harms from those individual charities, and, clearly, the benefits have to outweigh the harms.

  Q34  Paul Flynn: Why is it unacceptable for fee-charging charities to benefit only the wealthy but acceptable for religious charities to confine their benefits to the religious?

  Dame Suzi Leather: The religious charities are not defining their beneficiary class. If you are advancing religion and the way you are doing that, for instance, is to hold services, you cannot say, "This is a Christian service. You cannot come in if you are Jewish"—that would not be acceptable[6]—but the beneficiary class issue is rather different with fee-chargers, and, as I have said, case law, charity law does have this principle that, in order to be able to demonstrate public benefit, high fee-chargers do have to provide a sufficient opportunity for people to benefit in a material way from the benefits of that charity to be able to show public benefit.

  Q35 Paul Flynn: Do you think that provision of a prayer line—I understand you can ring up and someone will pray with you—or a public religious service that is available is a benefit for everybody?

  Dame Suzi Leather: Yes, it is outward facing. It has a public character, yes. You are not charging people to come to a service. That would not be public benefit. If you said Matins is going to cost you 500 quid, that would be an unreasonable charge.

  Q36  Paul Flynn: But a service provided to, say, Evangelical groups or Catholic groups or various other denominations is something that is going to be of advantage to only a small, tiny in some cases, minority of the population. To humanists, to atheists it is not a benefit.

  Dame Suzi Leather: Charity law holds that it is not the overall numbers of beneficiaries that count as much as the potential openness of the class. For instance, you could have a playing field in a small village that vanishingly small numbers of people are ever going to use. It is a tiny village; it is in the middle of nowhere. Nevertheless, it can be charitable because it is not artificially restricting the people who can benefit: the people from that village. All the people from that village can benefit.

  Q37  Mr Liddell-Grainger: I have just been looking at your board. Have you got anybody who has actually come from industry on your board? I will answer it for you. Every single one of you, like yourself, are quango queens. Your board is made up of people from either the BBC or organisations. You have only got three or four people who are lawyers and the rest are all from quangos. Have you nobody from business?

  Dame Suzi Leather: I am not quite sure what you mean by that.

  Q38  Mr Liddell-Grainger: Read the obituaries, if you want to call them that, from all of you: one BBC, next one Tropical Healthcare Trust, the next one is an independent adviser for social development, the next one, Cardigan Vale NHS Trust, the next one is a lawyer, fine, the next one, lawyer, the next one, co-founder and former chairman of a communications consultancy, an assistant director of regulation policy. I can go on. They are all people who have come from quangos.

  Dame Suzi Leather: No, I do not think that is true.

  Q39  Mr Liddell-Grainger: Who are the business people on there?

  Dame Suzi Leather: I think John Williams, who it says has a background in marketing and corporate—

  Q40  Mr Liddell-Grainger: I said him. That is fine.

  Dame Suzi Leather: —would say he was from the private sector.

  Q41  Mr Liddell-Grainger: Yes, which other ones? There are 12, or 13 technically.

  Dame Suzi Leather: I think both our lawyers would say they were from the private sector.

  Q42  Mr Liddell-Grainger: Yes. There are four lawyers.

  Dame Suzi Leather: There are nine people on the board, nine non-executives. So that is a third of them.

  Q43  Mr Liddell-Grainger: There are 12 altogether, are there not?

  Dame Suzi Leather: No, because we do not have executives on the board. The board is simply the non-executives. So a third of them are from non public sector backgrounds.

  Q44  Mr Liddell-Grainger: Which are lawyers. What about somebody from, say, Shell or, it does not matter what, from an actual business background as opposed to just to lawyers and quangos?

  Dame Suzi Leather: I do not appoint people to the board, Mr Liddell-Grainger.

  Q45  Mr Liddell-Grainger: Do you think it is a good idea; never mind, "I do not do it"? Do you think it is quite a good idea that you should have a broader based board?

  Dame Suzi Leather: I am absolutely delighted to have the board members I have. I think it is an extremely strong board. I think the mixture of skills, competences and backgrounds we have is superb.

  Q46  Mr Liddell-Grainger: You have got two from the BBC, which is a pretty bad start, and there is you. Have you ever had a proper job? Because it is all to do with quangos here.

  Mr Hind: Ian, Mr Liddell-Grainger, I should say—

  Q47  Mr Liddell-Grainger: You can call me Ian. Do not worry, Andrew.

  Mr Hind: I am sure there should be an element of formality in the interchange between witnesses and the Committee. I think what Suzi is saying is that there are eight board members.[7] One of those has a very clear commercial business background. There is a wide range of other experiences. To say that there is no business experience present in the CVs of these other people would be quite wrong. I think there is a significant amount of it.

  Q48 Mr Liddell-Grainger: I will tell you the reason I am asking the question. Your popularity since 2005 has gone up 3%—the trust, the way that members of the public look at the Charity Commission. In 2005 it was 63%; this year, the last accounting year, it was 66%. People do not trust you. You are not growing in the stature of the British public.

  Mr Hind: If I was allowed to say that that is nonsense, I would want to say it.

  Q49  Chairman: Do say it. You are entitled to say it.

  Mr Hind: That is absolute nonsense.

  Q50  Mr Liddell-Grainger: It is not nonsense.

  Mr Hind: No, Mr Liddell-Grainger; that is nonsense. It is a misunderstanding. I think it must be based on a misunderstanding of what that statistic is about. That statistic is not about public confidence in the Charity Commission: it is about public confidence in charities and charity. I would put it to the Committee that seeing an increase from 6.3 out of 10 to 6.6 out of 10 in public trust in charity over the last two or three years, against a backdrop of a massive decline in public trust in almost every other part of public life that any of us can think of—social work, journalism, dare I said it, parliamentarians, and so on—

  Q51  Chairman: We could see it coming!

  Mr Hind: —that actually is a very significant achievement. In terms of what people think about us, you need to refer to the stakeholders' survey, which shows, over three or four years, the scoring, on a scale of one to ten, has gone from 4.1 to 6.7. That is something like a 25% increase in the confidence that stakeholders have in the job the Charity Commission is doing over a very short time.

  Q52  Mr Liddell-Grainger: Stakeholders are stakeholders. What about the public? Your KPI 1 is public, is it not? It is page 19. I am sorry.

  Mr Hind: Yes, but it is not designed to be trust in the Commission; there is a much broader point here.

  Q53  Mr Liddell-Grainger: The point I am making is why have you not gone out to the public to say, "What do you think of the Charity Commission?" You have gone for stakeholders. Stakeholders have vested interests. We should know that.

  Mr Hind: I think, actually, we were very careful (and I can give you a detailed list of who the stakeholders were) to include in that number a number of severe critics of the Commission.

  Q54  Mr Liddell-Grainger: Could we have a list of the severe critics?

  Mr Hind: Indeed, you could.

  Q55  Mr Liddell-Grainger: I would be interested in talking to some of the severe critics.

  Mr Hind: It is a public document.

  Dame Suzi Leather: It is a public document.

  Q56  Mr Liddell-Grainger: Have you got a copy?

  Mr Hind: Can I try and complete the answer, because I think I can help a bit further. We do, within the survey you have pointed to, also ask for details about the public's view of the Commission and the public's levels of awareness of the Commission. It is not a headline indicator reported in the annual report, but what that shows is that something like 90% of the public are really keen to ensure that there is a regulator in whom they can have respect and confidence taking responsibility for the charity sector,[8] because without that they are not prepared to make donations, and the level of awareness of the work that the Charity Commission does has increased quite significantly. When you look at a whole series of measures, I think, whether you are talking about the public, whether you are talking about those in the charity sector, who, I completely accept, are stakeholders but with a vested interest, whether you are talking about the media, parliamentarians, people in business, they would say, "We actually rate the Commission pretty highly for the job it is doing."

  Q57 Mr Liddell-Grainger: That is news to me. I think most of the stuff you get, the reason your profile is higher, is because the papers were talking about the schools. That is what has heightened your profile; but I am intrigued that you go to stakeholders on one and the public on another. We know statistics and you do: you are a civil servant. Surely the whole idea of this is to find out exactly what people think. I was interested to see also that you have investigated four charities and you found they were not up to requirements. What are the four? Was one of them the one we have talked about that Tony brought up?

  Dame Suzi Leather: All of that information is in the public domain. All you have to do is look at our website.

  Mr Hind: The research that is reported here was conducted before we published the assessments on schools, so the increase in the Charity Commission's profile and everything I said about that was pre schools. No doubt our profile will have increased even higher following the assessments we published in July.

  Dame Suzi Leather: The research that we carried out on trustees' understanding of public benefit, which we published two weeks ago—that was 1,500 trustees; that is quite a large sample—showed that 76% know about the requirement, and in larger charities it is even higher, it is 71%. So that is important, because we do have a statutory responsibility for providing guidance and for explaining the operation of the public benefit requirements. I think the fact that we are able to achieve figures like that at this stage is very encouraging, but, clearly, we have some way to go. Many people still do not know about the public benefit requirement, and we have work to do to ensure that they do.

  Q58  Mr Liddell-Grainger: Lastly, the 400 charities that fall into the exempt charities, how many of those have you exempted and how many, like Eton and Winchester, were pre?

  Mr Hind: We have not exempted any.

  Dame Suzi Leather: They are not decisions taken by us.

  Q59  Mr Liddell-Grainger: But there are 400 that are existing anyway. Presumably Oxford, Cambridge, Durham, Eton and Winchester—I am just taking it from your letter—and universities in Wales, student unions in England and Wales are part of the 400, are they?

  Mr Hind: Yes. That is right. So there are two things happening. Those are going to come under our regulation and then there are a number of other exempt charities, like universities in England and museums and galleries exempted by legislation in the past, who are going to come under the regulatory ambit of principal regulators HEFCE and DCMS.

  Q60  Mr Liddell-Grainger: Which was to begin on 30 November. Has it actually begun?

  Mr Hind: It has begun, yes.

  Q61 Mr Liddell-Grainger: The girl behind you shook her head.

  Dame Suzi Leather: The exempt ones, I think, are starting early in 2010.

  Mr Hind: The process is, but they are not yet registered.

  Q62  Mr Liddell-Grainger: When do you hope to get that done by?

  Mr Hind: I think that depends on regulations being laid in the House to enable us to get on with it, Mr Liddell-Grainger. So, in fact, the delay is not with us; we are waiting for regulations to be laid.

  Chairman: I am going to move it on. Ian is a robust questioner and I would encourage that, but sometimes slightly over the top.

  Q63  Mr Liddell-Grainger: I have read Quentin Letts' book!

  Mr Hind: As long as you are happy for robust answers it does not matter.

  Mr Liddell-Grainger: That is great. That is what we are here for.

  Q64  Chairman: He does not mean to be unpleasant.

  Mr Hind: Chairman, while we have got a lull, may I come back to you on the question you gave us 30 minutes to answer?

  Q65  Chairman: Yes.

  Mr Hind: I think I got the answer within 30, but have not had an opportunity to put it to you.

  Q66  Chairman: Let us have it now.

  Mr Hind: The anonymised case study you pointed to was in respect of a branch of the Jehovah's Witnesses. We have subsequently published an inquiry report and we are still working with the umbrella body to improve their child protection policy. We can give you further information, but that is now on the public record.

  Chairman: I am grateful for that.

  Q67  Mr Walker: Do some small charities now fear the knock at the door from the Charity Commission? I am concerned about small charities like the one Paul was highlighting. I understand there is a small school in Preston that is under a lot of pressure at the moment. It only charges annual fees of £4,500-£5,000. Is there a danger that the Charity Commission is bullying some smaller charities?

  Dame Suzi Leather: I would be very surprised to hear that. That is not what the charities are telling us.

  Q68  Mr Walker: I am asking the question. It is a concern I have.

  Dame Suzi Leather: I am very surprised to hear that. That is not how we have gone about doing our assessments at all. We have asked the charities concerned that we have done assessments about, "How was the process for you?", and we have had no feedback like that whatsoever—in fact, quite the contrary.

  Q69  Mr Walker: So there is not a sort of frisson of fear out there, "My gosh, are we actually doing this right? Are we going to get in trouble from the Charity Commission? Is the Charity Commission going to want to audit our books"?

  Dame Suzi Leather: I think there are some misconceptions about the Commission. I think many people, for instance, suppose that we have an inspectorate. We do not have an inspectorate. We clearly have people in our investigation department who go out and do investigations, but I do not think small charities see us other, in general, than very supportive because we give so much support and guidance to small charities.

  Mr Hind: We would be really concerned, Mr Walker, if there was that concern. I think what I would say to add to what Suzi has said is that what we have done in the area of public benefit in the assessments, particularly in the area of the fee-charging charities, the care homes and the schools, has been whipped up as something that it really is not. I think there have been some with vested interests who have perhaps tried to scaremonger a bit. It is in the interests of professional advisers to take the line that you said some may be hearing, that the Charity Commission will be coming knocking on your door demanding explanations but that is absolutely not the reality.

  Dame Suzi Leather: What we are seeing is a kind of return to basics because of the public benefit requirement. So charities up and down the land are focusing now on "what do we do for public benefit and how are we going to express that?" Because the main change that all this is going to be about is in trustee annual reports; it is not by the Charity Commission carrying out assessments. We have done 12 in the first year; we have recently announced that we are going to do another four. This is not the main driver. The main driver and the main change is public accountability, and the research we have done on public understanding, trustees' understanding of the requirement, is that in larger charities, already, I think, almost 40% of charities have revisited their charitable aims. So that is a very good sign. I would also say that, although the requirement to register (which had been raised from £1,000 to £5,000 in April 2007) is there, about 50,000 small charities with an annual income of under £5,000 want to be registered because they like being on the Register of Charities. In regulation it is a rare thing for the regulated sector to fight to be within the attention of the regulator, but it does happen in charity regulation because people feel proud of it.

  Q70  Mr Walker: You mentioned you were doing these "Big Board" conversations—a slightly unfortunate title, I think.

  Dame Suzi Leather: Essentially it is a tool kit to stimulate debate in trustee boards.

  Q71  Mr Walker: Okay. The Charity Commission were leading those.

  Dame Suzi Leather: No, we simply provided a check-list of questions that we thought it would be helpful for boards of trustees to ask themselves to prepare themselves, as best they possibly can, for the economic situation they find themselves in.

  Q72  Mr Walker: We have had a charitable sector in this country for hundreds of years. In fact, we have almost led the world in the charitable sector. We have done extremely well at it. Is not the Commission slightly over-reaching itself by suggesting to many successful charities, "These are the questions that you may like to ask yourself about how to cope with the downturn"? I will tell you why. I am not going to attack you in the robust terms of my colleague, but, clearly, looking at your own board, there is hardly anybody on it who has actually ever managed profit and loss in the private sector. So I am not sure what level of expertise you have to advise charities on what to do in an economic downturn, bearing in mind your money comes directly from the taxpayer, or whoever, regardless of what is going on in the economy.

  Mr Hind: Charity trustees are not managing profit and loss accounts, they are actually managing what many would consider to be even more complex animals than commercial bodies.

  Q73  Mr Walker: They are raising money from people and, obviously, their ability to raise money is affected by the economy.

  Mr Hind: Yes, and I think what our board has, and I hope our executive team has, is pretty in-depth commercial skill and experience in that area but supplemented by a very real understanding and awareness of the issues that are arising in charities, and, actually, to be an effective charity trustee or an effective charity executive, you have to marry those two things. We issued this. This is it. It is called the Big Board Talk. The title is just a bit of, at one level, branding. It was not a paternalistic exercise saying, "Every trustee in the land, please sit down and ensure you go through this and give us the answers by Monday morning." It was actually a response to requests that we were getting day by day from dozens and dozens of charities saying, "Can you give us some advice about the kinds of things we need to think through in order to protect our charity, as far as we can, from the adverse impacts of the economic downturn?". On the basis of the experience we have got and talking to a number of charities who were already doing it, large and small, and we had a couple of meetings around the country to put it together, we came up with the 15 questions we think it would be really helpful for all trustees to consider whether they need to ask themselves and take action, and we left it to them. This is not the Commission saying, "You must do this." It was the Commission saying, "If you are worried about the economic downturn in the context of your charity, here is something we think you might find helpful. Go away and do with it whatever you want to do with it", and the feedback we have had on this has been absolutely amazing. The key thing has been trying to give trustees courage, actually, to do a number of things: to focus on their core and to get back to ensuring that they are, in difficult economic times, only doing the things that are absolutely at the core of their mission (and Mr Prentice's question was relevant to this earlier on), things that are core to your charitable objectives are the things you really should prioritise at difficult times. The other thing we said was that this is probably the time to start using the reserves that you have built up during the good times. This is a rainy day, if ever there was one. One of the things we see is that trustees, and very often those with commercial experience, are dead keen to build up reserves and be prudent during good times, but they are pretty reluctant to use those reserves for the purposes that they were intended, which is to sustain delivery to beneficiaries during the bad times, and we have tried to give charities courage to do that if they think it is right in their context.

  Q74  Mr Walker: Two very brief questions, Chairman, and then I will have had my turn. Firstly, do you think you will see some charities trying to escape from charitable status and to remove themselves from the ambit of the Charity Commission? Secondly, you mentioned that case law is still developing. Do you think there may be some legal challenges to the Charity Commission from care homes, from private schools, where they perhaps feel the Charity Commission has over-reached itself?

  Dame Suzi Leather: There may well be challenges to us, and actually we would welcome that because what you would get if you had challenges is that case law would move on and there would be cases for us then to draw on as well. We do not see that as a bad thing. That is why we have been very supportive of having, for instance, the Charity Tribunal introduced. That is helpful.

  Mr Hind: On the escape point, a fundamental defining characteristic of charities is that they are for the public and the assets are for the public. So, in fact, you cannot escape, using your word, Mr Walker. Once you are a charity and you have assets which are charitable, you cannot then decide that you would like to pull those assets out and put them into some other constitutional form. Our role, where charities and their trustees decide that they want to do something different or times have moved on and the assets need to be used in a different way, is to make a decision with the charity about how effectively they can be used somewhere else. We have quite a number of cases where trustees come to us and say, "Look, we think we have done our job, we want to escape from it", if you want to use that term. We will then make a decision about where the assets should be transferred so that they can be put in support of comparable charitable objectives within the auspices of a different charitable organisation.

  Q75  Julie Morgan: First of all, I want to say that I regret the way you were questioned by my colleague and I would like that put on the record. Last year you changed your guidance to charities on campaigning, giving them more freedom to campaign, and that was something that I welcomed. I wondered if you had any views on how that has developed, whether you have got any examples of how things have changed.

  Dame Suzi Leather: Thank you very much. I do not think our views changed, I do not think the rules changed, but our guidance, I think, was made easier to understand. We dropped the use of terms like "ancillary" and "dominant", which, I think, in ordinary people's speak was a little bit confusing, but it is good to hear that charities have welcomed it, and it is our experience also that charities have welcomed it, but I think it is important that, particularly in the next few months, we absolutely underline the importance of charities maintaining their independence, and they must not be, or be seen to be, linked to political parties. You know, because you understand this, that charities may carry out political activity, but only in support of their charitable purposes, and, indeed, we think that sometimes political activity in support of their charitable purposes is the most useful thing they can do. I think, more commonly, charities do a mixture of campaigning and providing services, and often their experience of service provision influences the campaigning they do and gives it a firmer evidence base—I think that that is an advantage—but charities, of course, cannot have political purposes, and that has quite a wide meaning. It means that they must not support or oppose any political party or campaign, candidate or manifesto, and we do come down very hard on charities that overstep the line. There have been cases in the last year or two—this has involved all political parties, I should say—where charities have given money to political parties, for instance, which is an absolute, no, no—you cannot do that—and we come down on those charities that have done that very firmly and we publish the inquiry reports or the regulatory case reports that we have made.

  Q76  Julie Morgan: Can you tell us some examples of charities that have done that?

  Dame Suzi Leather: Yes, Catz Club, for instance. That involved giving money to a political party. Which other ones?

  Mr Hind: I am sorry, just give me a moment to think about that and I will come back to you.

  Q77  Julie Morgan: What is your response? What do you do to those charities that do something that is so blatantly wrong?

  Dame Suzi Leather: If somebody reports to us that they think a charity has given a donation to a political party, we investigate that, because they are not allowed to do that. I think the important thing is that the investigation of that is a public document, so it is absolutely clear when charities have over-stepped the line. We have published quite a few case reports recently on this.

  Mr Hind: Yes, one was the Royal United Services Institute. There have been three cases in the last year. In fact there has been a case concerning donations by a charity to the Labour Party, donations by a charity to the Conservative Party and donations by a charity to the Liberal Democrats—three different charities, three different sets of circumstances—and in each of those cases what has happened is that the donation has had to be returned by the political parties in question, which has happened.[9] We have publicised the fact that this happened. We have ensured those charities understand what they can and cannot do and we have been working with the Electoral Commission to get some guidance published in the run-up to the election to ensure, on the broader point, that charities are clear about the space they have got to engage in campaigning and legitimate political activities but, also, where the line is drawn and beyond which they cannot go and if they do go we will take severe action, because there is nothing that is going to be more corrosive of public trust in charity than the public beginning to have a concern about the fact that in some way they are operating in political space.

  Q78 Julie Morgan: So you are waiting for guidance from the Electoral Commission.

  Dame Suzi Leather: No, we produce our own guidance.

  Q79  Julie Morgan: Have you produced this guidance?

  Dame Suzi Leather: We have existing guidance on campaigning, and that is in the public domain. It is on our website. We will produce new guidance before the General Election—we will probably produce that in February—and we are working with the Electoral Commission to ensure that there is as much consistency as there possibly can be.

  Q80  Julie Morgan: Because, obviously, this period is going to be very important with these issues?

  Dame Suzi Leather: Yes.

  Q81  Julie Morgan: Are there any other things you are planning to do in the run-up to the General Election to ensure that charities do not get involved in party politics?

  Dame Suzi Leather: Clearly, we will be publicising the guidance we produce.

  Q82  Julie Morgan: It seems amazing to me that any charity thought they could give money to political parties. Has anything happened to those charities, apart from being shamed, so to speak, publicly?

  Dame Suzi Leather: I think "very embarrassed" would be a good description.

  Q83  Julie Morgan: But nothing other than that, they have been able to carry on?

  Mr Hind: They were all one-off incidents. Clearly, we have the powers that we were talking about earlier on. If we are not satisfied with the co-operation of trustees or changed behaviour in a given set of circumstances we can take further action, but we did not believe it was necessary in those cases to do anything other than, in a sense, name and shame through the publication of our reports. It would not really have been proportionate to take that further.

  Q84  Kelvin Hopkins: In your letter of 26 November, the section on the Charities Act 2006, charities registering as exempt charities, you say there has been a delay in laying the statutory instruments. It is three years after the Act was passed. Is there a mystery about the delay?

  Mr Hind: No.

  Q85  Kelvin Hopkins: Is it departments dragging feet?

  Dame Suzi Leather: No, I do not think it was; I think it was a technical hitch, no more than that, and we are hoping that this will be cleared up early in the New Year.

  Q86  Kelvin Hopkins: Has it caused problems for you?

  Dame Suzi Leather: No, I would not say so.

  Q87  Kelvin Hopkins: The elephant in the room (and I raised this when you came to see us before and, indeed, privately) is public schools, boarding schools, which cater for the better off who want a privileged education for their offspring—small classes, and so on—and they do academically better than they would do because of those extra resources. This is an on-going debate. Has it exercised you at all, in the sense of people raising this with you: the fact that they are regarded as charities and they get tax benefits to look after the rich? If this tax was not being paid, there would be more money to spend on the rest of population in their education and this would be clearly sensible, fair, just and rational.

  Dame Suzi Leather: I said in an earlier answer that I think these overall judgments about whether certain forms of education are a good or a bad thing are not for the Charity Commission, I think that is for Parliament. Parliament asked us to do a job on public benefit. The first 12 assessments that we have carried out, and it is perhaps too early to draw very firm conclusions, we have learnt from those assessments and I think the charity sector itself has also learnt from those assessments. We have been encouraged by charities' understanding of the public benefit requirement and we have been encouraged by the many rather different ways in which different charities are able to give examples of public benefit. I think it has confirmed that our approach, and actually Parliament's approach really, was the right one: that we should make these judgments on a case-by-case basis, that you cannot really have an overall benchmark, for instance, on bursaries because every charity is different, and the sort of package of public benefit, as it were, that they want to put together will be different according to their circumstances. What we have to do is look at what they are doing with fee subsidy provision, look at what they are doing with the other partnership activity and work out whether we think it is sufficient. So I do think that the overall impact so far has been that both charities and the general public understand a bit more about what this public benefit requirement means, and that is a very good thing. We will be producing a research report towards the end of next year on trustees' annual reports—how are charities reporting to us on their public benefit, because it is a requirement for charities to do that—and I think that there we will get some composite material on what the impact has been. Of course, in 2011 there is going to be a review of the public benefit requirement, so that will be another opportunity to see what has been the sum of all this activity and drive, but, as I have said before and I will say again, the real change is in public accountability for what charities are doing so that people can look at the trustee annual reports of a charitable independent school and look at what they are doing, look at what their bursary amount is, look at the partnership activity, and people will be able to make up their own mind about whether they think that is sufficient to demonstrate their part of what they get for charitable status, because in return for charitable status, in a sense, you get a lot of benefits—tax breaks.

  Q88  Kelvin Hopkins: It does strike me that bursaries is tokenism, to give a veneer of respectability to privileged education for the rich, but I would not expect you to comment. The other concern is that the public schools are a very powerful lobby with connections at the very highest level in politics, and it must make you rather nervous about tackling this issue and saying anything more than the relatively bland comments of the kind you have made so far, with respect. I do understand the pressure you would be under in those circumstances, but I think it is right that these issues should be raised publicly, because if you take those out of the picture, people would look more favourably on charities in general. Anyway, that is a side issue.

  Dame Suzi Leather: I think what will happen, Mr Hopkins, as a result of the detail that is going to come in trustee annual reports is that public debate (and there obviously will be a continuing public debate) will have a better evidence base. So people will not only have the overall pro or anti this form of education, but those views will be underpinned by some evidence about what all these organisations are actually doing, and the truth is that many of them are doing a great deal.

  Q89  Kelvin Hopkins: I have absolutely no doubt that those who go to these schools have a more intensive education than those who do not and they have advantages throughout life as a result. Can I change the subject slightly? It is a big question, but would it not be possible to divorce automatic tax exemptions from the issue of charitable status and to give the tax exemptions to charitable giving—simply to the giving rather than the expenditure? Everybody would understand charities are about giving and the tax exemption is given to those who get advantages for giving rather than having charitable status and giving tax exemptions on expenditure. This would, I think, overcome the schools problem.

  Dame Suzi Leather: There is a category of organisations, and I think it is a category with only one sort of organisation in it, which is community amateur sports clubs, and I believe those are organisations that do not have to register with us but do get tax breaks. So, yes, and I think that was part of the 2006 Act.

  Mr Hind: The bigger point, Mr Hopkins, is that this is a matter for the Treasury; it is not a matter for the Charity Commission.

  Kelvin Hopkins: I realise you cannot make the political statements that we should make, but, on the other hand, I think it is right to raise these issues in this public forum. I hope they are not without relevance to the debate. They are the questions I really wanted to raise. I have no more questions.

  Q90  Mr Prentice: Can I just say I think your website is great.

  Mr Hind: Thank you very much.

  Q91  Mr Prentice: I think it is easy to navigate. I found out a huge amount about charities that I was interested in by going onto your website. You are going to update it in January, I believe.

  Dame Suzi Leather: Yes.

  Q92  Mr Prentice: We have been talking about accountability. It is a great tool to shine a spotlight on charities via your website. Is there a section in the Charity Commission that deals with Islamic charities? Do you have a little group that just focuses on Islamic charities?

  Dame Suzi Leather: We have for the last 18 months, two years had a Faith and Social Cohesion Unit. In 2004, I think, we started to do some outreach work with all sorts of faith organisations to find out whether the Commission was providing the kind of support, advice, help that they needed, and one of the main findings of that piece of work was that they wanted a specific unit that came from Muslim charities, they wanted a unit within the Commission that understood their faith, their organisational structures and could support them, and we were able to get some money about 18 months, two years ago in order to set this up, really to support the governance of Muslim organisations and mosques in particular. It was not ever intended, I do not think, that we would only ever look at Islamic organisations, but we would start with Islamic organisations, faith organisations. We had historically had a very strong relationship with Christian organisations, many of which actually are excepted from charitable status, but we had done a lot of work with them. We had much less good understanding of mosques and yet the Muslim faith was the fastest growing faith in this country. So I think we had a way to go on that. The purpose of the Faith and Social Cohesion Unit has been to bring more mosques into registered status and to strengthen the governance of the ones that are.

  Q93  Mr Prentice: Are there particular problems, particular issues that affect Muslim charities?

  Mr Hind: I think we would say there is a lower level of awareness of what it means to be a charity. I think that is something we see and it is something that is self-confessed, as it were, from Muslim communities, as Suzi was saying. What we have been trying to do is work with a number of umbrella groups around the Islamic part of the sector to build up that understanding.

  Dame Suzi Leather: I think, from the financial point of view, a smaller proportion of the monies raised within those organisations was going through accountable channels. One of the benefits of this piece of work is that this proportion has been increased, and it has been very successful; it has been welcomed. In terms of registration, since October 2007, when the unit was first started, we have had a 40% increase in registration of mosques.

  Q94  Mr Prentice: Okay. I spoke about Islamic Help and the 5,000 place Pendle Boarding School for Girls, but next door to me in Burnley there is the Al-Ehya Trust, which has just been renamed the Mohiuddin Trust, and they have purchased the old Burnley College and they are setting up Mohiuddin International Girls College which will have 1,500 places. I know it is not your job to comment on educational policy, I understand that, but the Mohiuddin Trust, when it talks about its objectives, mentions strengthening inter-community relationships and building stronger community integration and cohesion and, in that context, I just wonder if the Charity Commission would take a view on the number of girls at this International Girls College that would be drawn from overseas or the number of girls that would be taken to the school from the immediate locality because it could have a hugely destabilising effect on other schools in the immediate area. Do you understand what I am saying?

  Dame Suzi Leather: I do not think that what you are talking about is really a matter for the Charity Commission, but one of the other changes we have brought about is we have introduced an Advisory Committee on Faith within the Commission, and that is a committee which meets two or three times a year and has representatives of all the main faiths in this country. One of the things we have been talking about recently is how we can strengthen partnership working between faiths and inter-faith activity. From a governance structure, from a Charity Commission point of view, there is quite a lot of interest in doing that. I think that in future we could have quite an important role in bringing different charity organisations that are faith based together to share experience, for instance, in how you do strengthen governance, how you do induct trustees, how you do ensure that your organisation is effective and efficient; but one of the benefits that might flow from that would be greater social cohesion.

  Q95  Mr Prentice: I suppose I should know this, but how easy is it for a charity to change its charitable objectives? Is it a performance or is it relatively straightforward?

  Mr Hind: Relatively straightforward, providing the substance of what the charity wishes to do in the future is broadly similar to what it wanted to do in the past. If it wanted to do something fundamentally different, then that would be something that we would have to discuss with them and ensure that we were satisfied that it complied with the legal framework.

  Dame Suzi Leather: I would use the word "flex" rather than "change". I think you can flex, for instance, the beneficiary class if there are changes to society. For instance, the Jewish care home based in Cardiff. No longer is there a sufficient Jewish population there to support a care home, so we have enabled that charity to flex its beneficiary class to include people who are not of a Jewish faith.

  Q96  Mr Walker: Is that mission creep basically?

  Dame Suzi Leather: No, I do not think it is mission creep.

  Mr Walker: If you have got spare money, can you not do more with it? Would that not be a good thing? You could find other good causes to support as a charity.

  Q97  Mr Prentice: I do not want to go over old ground. My main concern is where you have a charity which explicitly is there for the relief of disasters overseas, whether it just requires the stroke of a pen to change the charitable objectives to include educational establishments in the United Kingdom. That is what I am getting at.

  Dame Suzi Leather: I would say that is well beyond "flex".

  Q98  Chairman: We are going to end now. Could I say, as usual, we have had quite a vigorous session, which is what you expect when you come here. I apologise for the fact that Ian was excessively unpleasant and personal. He is a public schoolboy. I suspect he wanted to get a favourable reference in the Daily Mail, which no doubt he will get. The Daily Mail, of course, as you know (and I am sorry that Mr Letts has gone), specialises in attacking you in the most personal and offensive way. That is what he is paid to do. He must get some kind of perverse pleasure in life for being offensive to people. We do not mind, because that is our job, but when he attacks people who cannot answer back, that is the hallmark of a bully through the ages. So I just want you to know that we value the work that you do and we value the work that the Commission does and we value the way in which you account to us and the spirit in which you do it. I do not know whether we will see you again, because this is going to be the end of a Parliament, but it has been very good doing business with you and we wish you well.

  Dame Suzi Leather: Thank you very much indeed.

  Q99  Mr Walker: If you are attacked personally by Quentin Letts, wear it as a badge of honour. My children read the Daily Mail avidly to see what nasty things he is saying about their father, so you must not worry about it too much.

  Dame Suzi Leather: Thank you very much indeed.

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1   Note from witness: Latest figure: 81% for year to end November 2009 Back

2   Note from witness: Where it is in the public interest, we issue a public statement at the beginning of a statutory inquiry. In other cases, we would always make this information available is asked. Back

3   Note from witness: In such a case the funds would be treated as proceeds of crime. Back

4   Note from witness: This is the percentage reduction in the administrative burden on charities which we expect to achieve by May 2010. Back

5   Note from witness: The move will save the Commission an estimated £13.1 million in running costs over a nine year period in comparison to our previous location at Harmsworth House, ie £1.45 million per year savings. Back

6   Note from witness: In the case of charities which advance religion, the beneficiary class is the whole community. Charity law holds that a charity can restrict who can attend where the restriction is reasonable and relevant to its charitable aims. Where a religious belief encourages its followers to conduct themselves in a socially responsible way in the wider community, the public in general benefits when the values held and expressed by that religion are put into practice in a way that leads to the moral or spiritual improvement of society. Back

7   Note from witness: The Commission has eight board members in addition to the Chair. Back

8   Note from witness: The survey of public trust and confidence in charities carried out for the Commission by Ipsos MORI in 2008 showed that, when the Commission's role was explained to them, just over half of those surveyed (53%) felt its role to be "essential", two in five (38%) felt it to be "very important", whilst a further 8% stated it to be "fairly important". In total 98% felt the Charity Commission's role was important. Back

9   Note from witness: The reference here is to three cases of charities supporting political parties, not all of which involved making financial donations directly. In the case involving the Labour party, donations were made by the charity Catz Club in breach of charity law, and these were returned by the party. The other two cases referred to are the Royal United Services Institute and Prince's Trust. We have published Regulatory Case Reports giving details of all three cases and these are publicly available. Back

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Prepared 18 January 2010