The role of the Charity Commission and "public benefit": Post-legislative scrutiny of the Charities Act 2006 - Public Administration Committee Contents

1  Introduction

1.  Charities and their work lie at the heart of what sort of country and the kind of society we aspire to be. In 2011/12 the public supported charities with £9.3 billion of donations.[1] Though the state supplanted the role of charities during the last century, charities still play a vital role in the wellbeing and altruism of our society, and all shades of political opinion support the strengthening and enhancement of their role.

2.  The Charities Act 2006 was a major piece of charity legislation, which intended to reduce bureaucracy, particularly for smaller charities; to modernise the definition of "charitable purposes"; to modernise and increase the accountability of the Charity Commission; and to maintain public trust in charities.[2] It was consolidated into the Charities Act 2011—a statute which did not make substantive changes to the law but brought together the provisions of a number of existing Acts of Parliament covering charity law into a single act to make it easier to follow charities legislation.[3]

3.  The 2006 Act sets out for the first time a statutory definition of "charity": an "institution which is established for charitable purposes only, and falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities".[4] The Act defines charitable purposes as a purpose that falls within a set list of charitable purposes (such as the "prevention or relief of poverty", and the "advancement of religion") and "is for the public benefit").[5] The Act requires all charities to demonstrate that they are for the "public benefit" and requires the Charity Commission to issue guidance on "public benefit".[6] We consider issues arising from the definition of "charity" and the lack of definition of "public benefit" in chapter five.

4.  Other provisions in the Act include:

a)  Reforming the operation of the Charity Commission and setting out its statutory objectives.[7] We consider this aspect of the Act in chapter three;

b)  The establishment of the Charity Tribunal to consider appeals against specific decisions of the Charity Commission (considered in chapter six of this Report);[8]

c)  An increase in the registration threshold for charities, from an annual income of £1,000 to £5,000, and the introduction of voluntary registration for charities of all sizes—this provision has been implemented in part and is considered in chapter four;[9]

d)  Provisions relating to charitable trustees, including a new power for charities to pay trustees for the provision of services to the charity.[10] This matter is considered in chapter nine.

e)  A new regulation system for charitable collections—this provision is considered in chapter eight.[11]

5.  The Act requires that the Government appoint a person to carry out a general review of the legislation, no more than five years after the Act was passed.[12] Lord Hodgson of Astley Abbots, Chairman of Nova Capital Management Limited and a Conservative life peer, who led for the Conservatives in the House of Lords during the passing of the Charities Act 2006, was appointed to carry out this review in November 2011.[13] He published his review in July 2012, making 102 recommendations, including 28 proposals which would require primary legislation.[14] On behalf of the House of Commons, the Public Administration Select Committee (PASC) thanks him for this valuable and meticulous work.

6.  In July 2012 we announced our intention to conduct a post-legislative scrutiny inquiry into the Charities Act 2006, building on Lord Hodgson's report, and also responding to a number of other developments regarding the regulation of the charitable sector:

a)  The decision of the Upper Tier Tribunal in the case of the Independent Schools Council (ISC) in October 2011—this decision followed a long-running legal battle that had commenced when the ISC challenged the public benefit guidance produced for independent schools by the Commission, which promoted the offering of bursaries to pupils who could not afford the fees, as a method of proving that a school with charitable status was operating for the public benefit;[15]

b)  The Charity Commission's decision to decline an application for charitable status from the Preston Down Trust, part of what is called the Plymouth Brethren Christian Church, or Exclusive Brethren (whose name is subject to some dispute as explained in paragraphs 71 and 72), and the Trust's subsequent decision to take their case to the Charity Tribunal;[16]

c)   Media reports of significant public concern caused by face-to-face fundraisers, or "chuggers";[17] and

d)  The reduction in budget of the Charity Commission by 33% in real terms between 2010/11 and 2014/15.[18]

In addition, PASC is mindful that the Government is creating new expectations for the sector by promoting new forms of public service delivery and the growth of social enterprises, against a background of tight restraint on government spending.

7.  The inquiry follows on from our Report The Big Society (December 2011), and our ongoing scrutiny of the Charity Commission, which has recently included a pre-appointment hearing for the new Chair of the Commission, William Shawcross.[19] Our predecessor Committee, the PASC in the 2005-2010 Parliament, also took evidence on the impact of the Charities Act 2006 on independent schools and religious organisations.[20]

8.  Over the course of this inquiry we received 192 memoranda. We also commissioned a review of charity legislation by the National Audit Office (NAO), to inform our inquiry. This is published on the NAO website. We held six evidence sessions, during which we heard from Lord Hodgson of Astley Abbotts; charity sector umbrella organisations; the fundraising self-regulatory bodies; think tanks; the Independent Schools Council and the Plymouth Brethren Christian Church (or Exclusive Brethren); charity lawyers; the Chair and Chief Executive of the Charity Commission and the Minister for Civil Society. We also took evidence from the newly formed Australian Charities and Not-for-profits Commission, who were visiting the UK, to provide an international comparison on charitable regulation. We would like to thank all who contributed to our inquiry, and particularly our Specialist Adviser, Dr Jonathan Garton, Reader in Law at the University of Warwick.[21]

1   "UK Giving 2012", Charities Aid Foundation,, p 5 Back

2   "Charity law and regulation", Cabinet Office, 7 May 2010,  Back

3   Charities Bill [HL], Standard Note SN/HA/6159, House of Commons Library, December 2011 Back

4   Charities Act 2006, section 1 Back

5   Ibid. section 2-3 Back

6   Ibid. section 3, 7 Back

7   Ibid. section 7 Back

8   Ibid. section 8 Back

9   Ibid. section 9 Back

10   Charities Act 2006, section 36 Back

11   Ibid. section 45 Back

12   Ibid. section 73 Back

13   "Lord Hodgson of Astley Abbotts is to lead a full review of the law relating to charities in England and Wales", Cabinet Office, 8 November 2011,  Back

14   Cabinet Office, Trusted and Independent: Giving charity back to charities: Review of the Charities Act 2006, July 2012, p 8 Back

15   The Independent Schools Council -v- The Charity Commission and others, The Upper Tribunal Tax and Chancery Chamber decision, TCC-JR/03/2010, 14 October 2011 Back

16   Ev 152, ev 99 Back

17   "The business of charity should be transparent", Daily Telegraph, 15 July 2012 Back

18   Public Administration Select Committee, Work of the Charity Commission: Oral and written evidence, HC 1542-I, Ev 18 Back

19   Public Administration Select Committee, Seventeenth Report of Session 2010-12, The Big Society, HC 902-I, Public Administration Select Committee, Fourth Report of Session 2012-13, Appointment of the Chair of the Charity Commission, HC 315-I Back

20   Oral evidence taken before the Public Administration Select Committee on 12 June 2008, 2 July 2008, 8 July 2008 and 9 October 2008, HC (2007-8) 663-i-v  Back

21   Dr Jonathan Garton was appointed as a Specialist Adviser for this inquiry on 12 September 2012. The following interests were declared: a formal connection with three universities, each of which is an exempt charity: employed by the University of Warwick as an associate Professor and Reader; holds an unpaid Senior Research Fellowship at the University of Liverpool; and has a book contract with Oxford University Press. Back

previous page contents next page

© Parliamentary copyright 2013
Prepared 6 June 2013