Charities (Protection and Social Investment) Bill

Written evidence submitted by Professor Gareth G Morgan (CHB 07)

(Professor of Charity Studies, Sheffield Hallam University)

1. About myself

I have some 26 years experience of research concerning charities and voluntary organisations. At Sheffield Hallam University I led the inter-faculty Centre for Voluntary Sector Research from 1998-2015. Since 2007 I have held a personal chair in the University as Professor of Charity Studies. I also lead a postgraduate course for charity professionals and I supervise doctoral students in this field.

I was one of two academic witnesses invited to give oral evidence in November 2014 to the Joint Committee on the Draft Protection of Charities Bill – the precursor to the present Bill. My evidence (both oral and written) appears in the Evidence Volume published by the Joint Committee [1]  . In its report, making recommendations to Government, the Committee refers to my evidence (or that of Professor Debra Morris who appeared alongside me) on approximately 15 occasions. [2]  

I have recently presented an open lecture at Sheffield Hallam University entitled "The End of Charity?" in which I highlight eight major threats to charitable status in England and Wales [3]   - the majority of the issues relates to failures in the current system of charity regulation.

2. The Context of Charity Regulation in England & Wales

I repeat what I said to the Joint Committee that the state of charity regulation in England and Wales is currently in a state of crisis. Broadly speaking, I remain of the view that the Charities (Protection and Social Investment) Bill is simply "tinkering round the edges".

The details of my concerns are mentioned out in my 2014 evidence [4] , and developed in the detailed analysis I published for the open lecture mentioned [5] , so I will not repeat the full arguments here.

However, in summary my principal concerns regarding charity regulation are as follows:

(1) INADEQUATE RESOURCING OF THE CHARITY COMMISSION

(2) CONSTANT CRITICISM OF THE CHARITY COMMISSION

(3) A REGISTER OF CHARITIES WHICH OMITS VAST SWATHES OF CHARITIES. Many charities are exempt or excepted from charity registration under s.30 of the Charities Act 2011. The Commission estimates that there could well be 90,000 charities in these categories – more than half of the number of registered charities.

(4) FAILURE TO IMPLEMENT EXISTING LEGISLATION. Successive Ministers for the Cabinet Office have omitted to use a number of existing powers already enacted that would greatly strengthen charity regulation so it seems odd to devoted resources to a new Bill.

In particular, the failure to implement a straightforward update to existing regulations to allow for the 2015 Charities SORPs [6]   is causing chaos in terms of the charity accounting requirements for thousands of law-abiding charities. So many charities will get to year ends at 31 December 2015 with the regulations still referring to SORP 2005. [7]

Similarly, a simple commencement order would have a huge deregulatory benefit in enabling charities constituted as charity companies to convert to the much simpler structure of charitable incorporated organisations (CIOs). The relevant statutory framework is all there in the 2011 Act. [8]

Both of these changes have been implemented under the equivalent legislation in Scotland [9] [10] – so England and Wales is suffering with an outdated regulatory framework.

(5) FUNDRAISING ABUSES. Although I welcome clause 14 in the present Bill, I remain concern more generally about fundraising abuses by a small number of charities. I think the Etherington report [11] raised many useful points, but it is worth noting that the Minister already has extensive powers to regulate fundraising. [12]

(6) PERCEPTION OF COUNTER-TERRORISM RISKS AND THE IMPACT ON CHARITY REGULATION. I am concerned that the agenda for the present Bill is unduly motivated by discussion of terrorism abuses. There is very little evidence of UK charities being directly abused for terrorist purposes, but this focus is having a chilling effect on the sector.

3. Specific Comments on the Bill

Many of the provisions in the Bill make sense and for the most part will strengthen the Commission’s powers in logical ways – although, as I comment above, this Bill will do little to solve the fundamental problems of charity regulation in England & Wales.

However, I have two specific comments to make which would improve the Bill both in fairness and effectiveness.

3.1 Clause 1 – Official warnings by the Commission.

I agree it makes sense for the Commission to issue warnings to charities where appropriate. However, as I argued in my evidence to the Joint Committee in relation to the Draft Bill, if the Commission is given the power as proposed to publicise these warnings there must be a right of appeal to the Tribunal. A charity’s reputation could be seriously harmed if the Commission issued a warning incorrectly.

Although the Cabinet Office has improved the Bill slightly by requiring the Commission to give advance notice of such warnings in order to allow representations to be made, in my experience there are cases where the Commission digs its heals in and ignores representations either through lack of resources or sheer unwillingness to change its mind

The warning is clearly an exercise of the Commission’s formal powers under the 2011 Act and must therefore have a right of appeal to the Tribunal.

I welcome the amendments to the Bill which Hon. Members have tabled to implement such a right of appeal and strongly encourage the Committee to accept them.

3.2 New clause – time limitation on excepted charities and exempt charities with no principal regulator

The Joint Committee strongly recommended [13] that the Government should find ways to remove the systems of excepted charities and exempt charities (see my evidence above).

In its response to the Committee, the Government agreed to keep the matter under review, but felt the proposed Bill was not the place to address this.

However, now that the scope of the Bill has been broadened to including social investment, regulation of fundraising and other issues, it cannot be argued that the status of excepted and exempt charities fall outside the Bill. This is likely to be the only Bill for many years dealing with regulatory issues in the Charities Act 2011. A simple amendment to insert a new clause would ensure the Minister’s existing powers to phase out such unregistered charities could not be delayed indefinitely.

The registration of formerly excepted charities over £100,000 income commenced from 31 January 2009 (using the powers enacted in the Charities Act 2006), but the Minister has not so far used his powers to lower that limit to £5,000 in line with the registration requirement for other charities. I suggest a 10 year limit from that date should be imposed for completion of that process, which could be achieved with a simple amendment as follows.

Likewise, the process of bringing formerly exempt charities under principal regulators – or alternatively, removing their exempt status so that they are required to register – seems to have halted, so again a time limit would be helpful to prevent indefinite postponement of the issue.

The following amendment to add a new clause to the Bill would address both issues.

After clause 13 insert the following new clause

"x. Time limit with regard to excepted and exempt charities

In section 31 of the Charities 2011 insert:

(6) The Minister shall ensure that an order or series of orders is made to amend the amount specified in section 30(2)(b) and section 30(2)(c) bringing them into alignment with the amount in section 30(2)(d) to take effect not later than 31 January 2019.

(7) The Minister shall makes orders under section 23(1)(b) or under section 25 to ensure that no later than 31 January 2019 every institution which remains an exempt charity at that date is subject to a principal regulator.

I trust these comments are helpful to the Committee.

December 2015


[1] Draft Protection of Charities Bill - Evidence Volume, pp 300-306.

[1] www.parliament.uk/documents/joint-committees/draft-protection-of-charities/evidence-volume-protection-of-charities.pdf.

[2] Draft Protection of Charities Bill – Presented to Parliament by the Minister for the Cabinet Office (Cm 8954) www.gov.uk/government/publications/draft-protection-of-charities-bill - see in particular, 21, 24, 25, 34, 35, 43, 44, 49, 52, 63, 64, 67, 69, 74, 75.

[3] Morgan, GG (2015). The End of Charity (Valedictory lecture at Sheffield Hallam University, 9 December 2015) http://www.shu.ac.uk/_assets/pdf/the-end-of-charity-morgan.pdf

[4] See note 1.

[5] See note 3.

[6] Statement of Recommended Practice on Accounting and Reporting by Charities. The SORP is the primary standard for charity accounting in the UK, and is in effect compulsory for many charities – either by virtue of regulations under the Charities Act 2011 s.123(1), or, in the case of charitable companies, because of the requirements of company law for company accounts to give a ‘true and fair view’ taking account of relevant standards. At present, most charity accounts are prepared under SORP 2005 (Charity Commission 2005), but now SORPs are taken effect for financial years beginning on or after 1 January 2015 (Charity Commission & OSCR 2014a & 2014b).

[7] The Charities (Accounts and Reports) Regulations 2008 (SI 2008/629). 2 and 8(5).

[8] Charities Act 2011, ss.228-234.

[9] The start date of conversion of charitable companies to SCIOs was set at 1 January 2012 under the Charities and Trustee Investment (Scotland) Act 2005 Commencement No 5 Order 2011 (SSI 2011/20). For further discussion, see Morgan (2013b, pp243 & 268-71) and Morgan (2015a).

[10] The Charities Accounts (Scotland) Amendment (No. 2) Regulations 2014 (SSI 2014/335).

[11] Etherington, S., Leigh, Pitkeathley & Wallace (2015).

[12] I am surprised at the Minister’s reluctance to use powers which are already on the statute book in the Charities Act 2006 (s.69) to allow the regulation of fundraising more generally.

[13] DPOCB Report, pp.20-22, paras.38-44.

 

Prepared 16th December 2015