Memorandum from Joseph Rowntree Charitable
Trust (JRCT) (DCH 135)
1. JRCT has broadly welcomed the preparatory
work for this legislation, notably Private Action, Public Benefit,
and extends this general welcome to the draft bill.
2. This submission recognises the tight
timetable for this stage of scrutiny and the direction as to the
committee's main areas of concern. This submission does not imply
specific endorsement or disapproval of any sections not mentioned
below.
3. At earlier stages, JRCT has particularly
commended principle P1 (set out in the original PIU scoping note)
on which the government's review of this sector was based, which
affirms the role of the voluntary sector and civil society as
an independent critical voice. This is not only a matter of freedom
of association and expression, but also a valuable contribution
to democratic society, by providing alternative perspectives and
articulating public concerns through informed channels. The need
to facilitate rather than restrict support to this sector was
well summarised by principle P7 of the scoping note.
FLEXIBILITY, ACCOUNTABILITY,
POWERS OF
THE CHARITY
COMMISSION
3. JRCT believes that the proper functions
of the Charity Commission are adequately set out in Clause 5.1C.2.
However, JRCT has concern that the objectives of the Charity Commission,
as set out in Clause 5.1B.2 and 3, might create a more interventionist
Commission, with an ever increasing remit.
4. JRCT is concerned by the presumption
that there is a need to increase public confidence in charities
[Clause 5.1B.3.1]. Research (eg Zadek, The Civil Corporation,
Earthscan, 2001, p 45) shows that the level of trust in charities
is higher than trust in other bodies, including businesses, government
and the BBC. JRCT therefore suggests that in Clause 5.1B.3.1 "increase"
should be replaced by "maintain".
5. In the same spirit, in Clause 5.1B.3.2
"increase" should be changed to "ensure".
6. The third objective, Clause 5.1B.3.3
is of greatest concern. This is an entirely new objective, not
prefigured in any previous consultation document, not adequately
explained in this clause, and open to widely varying interpretation.
"Maximising social and economic impact" suggests a model
of operation that is not applicable or appropriate to many charities.
Responsibility for matters such as the effective use of resources
or the meeting of output targets, which could be considered as
falling under this objective, are clearly and rightly the responsibility
of Trustees, who alone have the duty to decide how to use the
discretion given them under their governing instrument. They may
do so under obligations or expectations from donors and funding
bodies, but these are not matters for the regulator. The clause
and objective should be deleted.
7. JRCT believes that it would be useful
to add to the list of duties [Clause 5.1D.2] a duty to act reasonable,
fairly and proportionately, and a further duty to comply with
the provisions of the Human Rights Act.
CHARITABLE PURPOSES
AND PUBLIC
BENEFIT
8. JRCT generally welcomes the proposed
list of charitable heads [Clause 2.2] On a minor point, we do
not see the need for (k) the advancement of animal welfare to
be written into the face of the Bill.
9. JRCT notes that there is no longer an
"other purposes" charitable head (comparable to the
fourth head in present law, or the proposed tenth head in Private
Action, Public Benefit.) The very fact that the new list of
charitable heads seems reasonably comprehensive may discourage
the recognition by analogy of new areas of charitable activity.
This risk will increase with time. Although Clause 2.4 is reasonably
comprehensive, it might be helpful to add an additional corresponding
function to the Charity Commissions functions as listed in Clause
5.1C.2—eg "Recognising new areas of charitable activity
that may emerge under the provisions of clause 2.4".
10. JRCT welcomes the intention to apply
a public benefit across all heads. JRCT does not have a view as
to whether public benefit needs to be defined in the bill. Any
definition should recognise that the public consists of citizens
and not merely users of services, and that public benefit can
therefore be corporate (eg the promotion of ethical standards
of conduct and compliance with the law in the public and private
sectors) as well as collective (eg the relief of persons in need).
11. JRCT has no specialist knowledge in
the area of fee-paying schools. However, we do note that it would
be unfortunate if the definition of public benefit (whether or
not this is included in the bill) that the Charity Commission
uses in practice should be skewed to the point of incoherence
simply to accommodate fee-paying schools, whose public benefit
is, at the very least, questionable. JRCT also hopes that steps
will be taken to ensure that the proposed increase to the threshold
for mandatory registration of charities will not lead to educational
charities being set up with income just below the threshold as
a vehicle to fund school and university fees, either for the children
of the settlor or, more deviously, by reciprocal arrangements
with friends. This abuse of the charitable form would damage the
reputation and interests of genuine charities.
CHARITABLE INCORPORATED
ORGANISATION
12. JRCT welcomes the proposals for a CIO
as a new, limited liability, charitable form. However, JRCT is
disappointed that the recommendation from Private Action, Public
Benefit that this should be available in a foundation form (without
members) as well as a membership form, is not included in the
bill. The likely outcome of this omission is that a number of
CIOs will go through the motions of maintaining a nominal membership
structure, simply to secure limited liability, which is precisely
the sort of inappropriate and wasteful governance arrangement
that the CIO was designed to remove. JRCT therefore recommends
that provision should be made for a foundation form of the CIO.
June 2004
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