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,
www.cafonline.org, p 5 Back
2
"Charity law and regulation", Cabinet Office, 7
May 2010, cabinetoffice.gov.uk 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, www.gov.uk/government/news 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
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