Public Administration CommitteeWritten evidence submitted by Plymouth Brethren Christian Church (CH 21)

Summary

This response is made on behalf of the Plymouth Brethren Christian Church, representing 16,000 Brethren and over 300 gospel halls across the UK.

We have great concerns that the Charities Act 2006, far from clarifying the meaning of charity, has created confusion and uncertainty which previously did not exist.

In particular, as a direct result of the Charities Act 2006, and its implementation by the Charity Commission, the charitable status of the Brethren gospel halls in England and Wales is under threat.

The confusion and uncertainty extends also to the tax position, causing difficulties for the charities, donors and HMRC.

Valuable charity resources are having to be spent on recourse through the charity tribunal.

Faith charities must now have cause to fear for their status (contrary to the Charity Commission’s published guidance and Parliamentary assurances).

The Charities Act 2006 created the circumstances which allowed this to occur.

Introduction

1. We are grateful to the Committee for instituting this inquiry into the impact and implementation of the Charities Act 2006 (the Act). We have grave concerns that the Act has not clarified the meaning of charity. Instead, it has created uncertainty by allowing an inappropriate latitude in the way the meaning of charity, particularly public benefit, may be interpreted by the Charity Commission (the Commission). Unless challenged, that interpretation stands in substitution for the law, as enacted by Parliament and interpreted by the courts.

2. This response concentrates on question 1c of the Committee’s inquiry: To what extent has the Charities Act 2006 achieved its intended effects of … providing a clear definition of charity, with an emphasis on public benefit? It also touches on issues of the functions, duties and accountability of the Commission (question 1d).

About the Plymouth Brethren Christian Church

3. The Plymouth Brethren Christian Church is a progressive, growing, worldwide Christian movement established in 1828 when a number left the established church and began to celebrate the Lord’s Supper (Holy Communion) in simplicity in accordance with the original directions of the Holy Scriptures.

4. In accordance with our beliefs (based upon the Holy Bible), we practise separation. This is based in a moral distinction between right and wrong, good and evil. It means that Brethren will, as a matter of conscience, mix socially and by association with other Brethren. However, it would be wrong to assume that Brethren do not take their place in the local community. We do not advertise our presence, but we live as normal members of the community and take an active part in community life. Our moral code, derived from our beliefs, means that Brethren feel a strong impulse to offer assistance where it is needed, whether to Brethren or non-Brethren. This can take many forms, from singular acts of generosity to community projects. Brethren children are encouraged from an early age to be generous and to engage in fundraising for charity.

5. It is fundamental to our beliefs that we spread the news about our faith through regular street preaching and distribution of gospel tracts, which are also freely available at our places of worship. Details of our services can be obtained via our gospel halls (either directly or through contact details provided at the hall). Non-Brethren may attend our services. Generally, our Holy Communion service alone is for Brethren, but we would not expect to turn away a non-Brethren.

6. In short, we believe that our gospel halls advance the Christian religion through advancing the beliefs of the Plymouth Brethren Christian Church. We are not a closed order, but live in society, take part in open preaching and our gospel halls are open to non-Brethren.

7. The charitable status of gospel halls was confirmed by the High Court in 1981.1 Due to a problem created by the Act, charities are bearing the cost of the same question being decided again.

Problems Arising From the Act

8. Although the Act was passed nearly six years ago, some grave problems arising from the meaning of charity in the Act are only now surfacing.

9. In particular, the Commission recently refused to register the Preston Down Trust (the Trust), a Plymouth Brethren gospel hall, as a charity. The decision stands to have wider ramifications; out of the blue, the gospel halls, including registered charities, are suddenly facing an uncertain future. The decision arises directly from the Act (and the Commission’s interpretation of it).

10. The decision was the more surprising as it came without warning. For over a year the Commission had been considering a reference to the tribunal to help it interpret the law regarding the Trust’s status. Then, without notice or consultation, the Trust was informed that the Commission had decided not to refer the matter and had refused registration. There was no offer of dialogue with the Commission; the Trust was given no opportunity to respond other than to appeal to the tribunal.

11. This volte-face raises serious concerns over the way the Commission administers its statutory functions and objectives. Does it now see it as its duty to drive to the tribunal any question of public benefit which, following the Act, it (perhaps alone) perceives to be in doubt, for hard won clarification at charities’ expense?

12. The Trust is having to resort to litigation, at immense cost, to challenge the Commission’s decision. The Horsforth Gospel Hall Trust, a registered charity since 1988, has been joined to the appeal because it faces having its charitable status removed.

13. This submission is not about that litigation, which must be allowed to run its course according to the tribunal rules and procedure. Our concern arises from the circumstances which have allowed this situation to arise, something which is a shocking turn of events for these charities never prefaced when the Act was passed. On the contrary, the message from the then Government was that charities created to advance established religions had nothing to fear.2

Effect on Charities

14. The charities which we represent are now having to spend funds on legal fees to defend their charitable status; they would rather be expending those funds on good works.

15. The Commission’s decision puts the tax status of hundreds of charities in doubt. This is a novel situation for HMRC. We are trying to deal with HMRC over how each gospel hall should communicate with its donors. Those donors, who run into thousands, will be making donations with gift aid declarations and making claims through their self-assessment returns. The charities do not know what to tell them. This is happening at a time when charities and donors alike are severely stretched financially.

16. The situation is made more challenging (and unexpected) because gospel halls are registered charities in Scotland. The Commission’s decision raises the alarming prospect, for both charities and HMRC, of inconsistent recognition of charities across the UK.

17. Also looming over the charities is the fear of what happens to their assets if the appeal is lost. Many worry that the assets will be taken away, and possibly applied for purposes contrary to the donors’ beliefs. This fear and uncertainty is causing great anxiety among the charities we represent.

18. It should not be assumed that this is a problem for gospel halls only. If the Commission’s decision were to cast doubt on the public benefit conferred through proselytising or public services, or that a service is “public” where non-believers may attend but not participate in all aspects, then many faith charities will have cause to worry over what would be a new interpretation of the law, seemingly not contemplated by Parliament.3

19. It would also be an interpretation of the law not laid bare in the Commission’s published guidance. Faith charities cannot therefore rely upon that guidance for assurance.

Difficulties Arising From the Act

20. The difficulties in which the gospel halls are now mired arise as a direct result of the Act. It created uncertainty, which previously did not exist, and it created a mechanism to permit a new interpretation of case law which is susceptible to the subjective interpretation of the interpreter, rather than to the more objective framework established over centuries by the courts.

21. Creating the first statutory definition of charity in English law was no mean feat. Parliament did not attempt to set out a complete definition (correctly, we think). Save for some small additions in some descriptions of purposes, the statutory definition did not seek to change the meaning which had previously evolved through case law, save in one seemingly insignificant respect.

22. The explanatory notes to the Act set out that s3(2) of the Act4 “abolishes the presumption [of public benefit] that organisations for the relief of poverty, the advancement of education, or the advancement of religion enjoy, putting all charitable purposes on the same footing”.5 This abolition was said “not by itself [to] have the effect of depriving poverty relief, educational and religious organisations that were registered as charities while the presumption existed of their charitable status”.

23. No meaning was ascribed to “public benefit” in the Act, which preserved the meaning from case law, subject to the “abolition” of the presumption. The Commission was charged with producing guidance “in furtherance of its public benefit objective”, ie to promote awareness and understanding of the operation of the requirement that, to be charitable, a purpose must be “for the public benefit”.

24. On the face of it, the statutory definition changed little, if anything; but the effect for charities, especially now faith charities, of the definition and the Commission’s interpretation of it has been profound.

Lack of clarity

25. The Act has created new uncertainty over the meaning of charity. No analysis was offered at the time as to the effect, if any, of the supposed abolition of the presumption of public benefit. Such abolition stood to affect pre-existing registered charities, but also had the potential to affect pre-existing case law to the extent that it rested on any presumption.

26. The failure to explain the effect of s3(2) has caused it to be considered in the tribunals at the cost of several hundred thousand pounds of public and charity money. So far, the Upper Tribunal has considered the effect of s3(2) for charities for the advancement of education6 and for the relief of poverty,7 ie two of the three former heads of charity which supposedly benefited from the presumption.

27. In each case, the Upper Tribunal has determined that there never was a presumption of public benefit. At most, there may have been a predisposition that, say, education is generally beneficial, but the courts made their decisions based upon evidence, rather than a presumption.8

28. Sadly, the existence of any presumption, and the effect, if any, of s3(2), for charities established for the advancement of religion remains unclear. In the case law, the courts have accepted that religious practice has an inherently beneficial moral effect on society. It is not clear that this amounted to a presumption in the sense meant in s3(2) or a mere predisposition: if public benefit was in doubt in a given case, the courts assessed it on the evidence. The Act has left room for subjective interpretation.

29. Six years after the Act was passed, and at further expense to the charity and public sector, the tribunal will now be required to consider the same question a third time, this time in relation to charities for the advancement of religion.

30. In enacting s3(2), Parliament appears to have assumed that a presumption existed, which needed to be removed in order to put all charitable purposes on an equal footing. It now seems Parliament was in error in its assumption and the effects of enacting s3(2).

31. The enactment of s3(2) has caused, and is still causing, a great deal of uncertainty, stress and cost for, it seems, no effect.

Controversy

32. Prior to the Act, public benefit did not seem to be a controversial subject. There was not much case law on it, generally because the question of whether or not any purpose was “for the public benefit” was obvious. The Commission acknowledged as much in its general guidance on public benefit.9 It was only in cases where it was not obvious, that the matter came to be considered by the courts.

33. In the context of the advancement of religion, we are not aware of public benefit being considered a problem. Such controversy as there was, prior to the Act, tended to relate less to public benefit and more to the question of what constituted a “religion” under charity law.10

34. Since the Act was passed, however, the Committee will be well aware that public benefit has become an issue of great controversy. Yet, the Act changed little, if anything; the tribunal has made no decision to precipitate a change of views on what is or is not a charity. Why then has the controversy arisen; and to what benefit?

The Public Benefit Guidance and the Commission’s approach to Public Benefit

35. The responsibility for explaining the meaning of public benefit was passed to the Commission under the Act. This was probably a pragmatic decision, given the impracticality of trying to draft (let alone agree) a statutory definition. However, it gave the Commission a difficult task.

36. Unfortunately, we do not consider that the Commission has succeeded in that task. The Commission’s guidance was controversial from the start, with many charity lawyers disagreeing fundamentally with its legal basis. Although the Commission was required to consult publicly on its guidance, it is unclear to what extent, if at all, the Commission paid heed to the responses to its consultations. (In contrast to Government consultations, no full report was published of the consultation submissions and the Commission’s response).

37. The Commission stated that it would welcome challenge to its guidance, but, despite the controversy, took no steps to test it itself.

38. The Commission’s untested guidance, given added authority by its production pursuant to statutory duty, became the law for all practical purposes.

Who applies the law? The Commission.

What interpretation does it use? Its own interpretation as (generally) in its guidance.

Where does the press look for an interpretation of the law? The Commission’s guidance.

Where does the public look for the meaning of the law? The press and the Commission’s guidance.

39. The guidance became, effectively, a self-fulfilling prophesy, no matter that it was widely believed to be wrong in material respects.

40. The guidance was eventually challenged, by way of judicial review, in the Upper Tribunal,11 a brave and expensive challenge necessitated by the Act. Following that challenge, the Commission is required to change its guidance, but it is not clear that it is changing its approach. It is also now unclear to what extent it stands by its guidance. Our recent experience suggests an approach by the Commission out of tune with its published public benefit guidance for charities for the advancement of religion.

41. Charities are now in a position where they may receive a decision from the Commission, based upon an interpretation of the law which differs from both established understanding and the Commission’s published guidance on public benefit. Charities’ only recourse is to appeal to the tribunal, an expensive and stressful process.

42. Parliament may have thought that, in passing the Act, it was bringing some clarity to the charity sector. It seems instead to have opened the way to charities being forced to a succession of litigation as they are subjected to new areas of doubt, identified by the Commission, which may arise without warning or consultation. It is not clear to us what is driving this, but its origins must lie in the Act.

Possible reform?

43. We acknowledge that amending the Act is not a straightforward, or cheap, process and that any reform may be years away. We would, therefore, urge the Committee to consider what may be done now to bring some calm and certainty to the situation in a measured manner.

44. Some authoritative clarification is required. Absent an analysis and determination by the Supreme Court, we wonder whether this may be done through a paper (perhaps of the Law Commission):

(a)analysing the presumption and the effect, if any, of s3(2) of the Act (provided, of course, this did not interfere in the current tribunal case); and

(b)providing advice on what should happen to a charity’s assets should it be stripped of charity status.

Alternatively, perhaps the Attorney General may take a greater role in providing clarification of these points, without recourse to litigation.

45. We would welcome a return to the pre-Act status quo. On the face of it, the Act changed little or nothing, yet it set a hare running, leading to confusion and litigation. If the Act were to be amended, we feel that care must be taken to save a bad situation turning worse.

(c)We would welcome the repeal of s3(2).

(d)We caution against any other attempt to change the definition of charity: the definition and effects for the sector of any change must be considered and explained clearly.

(e)If guidance is considered necessary on any aspect of the definition of charity, it should be subject to some level of appraisal.

46. Although not perfect, the meaning of charity has evolved over centuries through careful consideration by the courts (up to the highest level) of the decisions themselves and, crucially, their potential consequences for hundreds, sometimes thousands, of other charities. It is the basis by which thousands of today’s charities have been accepted as such. Parliament should be cautious of changing the meaning without a full and serious review of all the potential consequences for existing charities and the future development of the sector.

Conclusion

47. We hope that the Committee will consider seriously the issues raised in this submission. We are happy to provide further evidence or to discuss matters with members of the Committee if that would assist.

September 2012