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The charitable sector is at the heart of UK society, with £9.3 billion received in donations from the public in 2011/2012, and around 25 new applications for charitable status received by the Charity Commission every working day.
The regulation of the charitable sector in England and Wales dates back to the 1601 Statute of Charitable Uses which set out the first definition of charity in English law and the purposes for which a charity could be established. While further legislation and case law emerged over time, at the start of the 21st century the definition of a charity remained largely unchanged from 1601.
The Charities Act 2006, on which we have conducted post-legislative scrutiny following a thorough and welcome review by Lord Hodgson of Astley Abbotts, sought to "provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society; to encourage a vibrant and diverse sector, independent of Government; and to sustain high levels of public confidence in charities through effective regulation".
We have concluded that, while the Act has been broadly welcomed by the charitable sector, it is critically flawed on the issue of public benefit. The Act stated that "it is not to be presumed that a purpose of a particular description is for the public benefit". While it is arguable that such a presumption was in place prior to 2006, the stated removal of the presumption, the failure to define "public benefit" and the requirement for the Charity Commission to produce public benefit guidance, left the Commission, a branch of the executive, in an impossible position. This was evidenced by the Commission's costly legal battles with the Independent Schools Council and the Plymouth Brethren Christian Church (or Exclusive Brethren). While we have criticised the interpretation of the law by the Charity Commission, we also believe that it is essential for Parliament to revisit this legislation and set the criteria for charitable status rather than delegating such decisions to the Charity Commission and the courts.
We have also considered the impact of face-to-face fundraising, or chugging, and warned that self-regulation has failed so far to generate the level of public confidence which is essential to maintain the reputation of the charitable sector.
We have called for ministers to revise the statutory objectives for the Charity Commission, to allow the Commission to focus its limited resources on regulating the sector; rejected the proposal of Lord Hodgson to increase the financial threshold for compulsory registration of a charity with the Charity Commission; and called for charities to publish their spending on campaigning and political activity.
We believe our recommendations will help to maintain public trust in charities and the Charity Commission, and promote the good work of charitable organisations in communities across the country.
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