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18 September 2013

A review of charities' public benefit

A review of charities' public benefit

The government has just published its Response to the 2012 statutory Review by Lord Hodgson of the Charities Act 2006 and the separate Review published in June 2013 by the House of Commons Select Committee on Public Administration (PASC). This applies only to England and Wales.

Summarising key conclusions, the government accepts that the Charity Commission needs to have a sharper focus on its core responsibilities and that notwithstanding recent criticism, public benefit should be left to case law rather than attempting to define it in statute. It also agrees with the PASC that the Charity Commission should not charge the charities it regulates.

A selective focus on important aspects of the Response follows below.

The government goes along with Lord Hodgson that the Charity Commission should prioritise its core functions which it reaffirms are:
   a. Registering charities (and maintaining an accurate register);
   b. Identifying, deterring, and tackling misconduct and abuse of charitable status;
   c. Providing the public with information (in a relevant form which is easily understood by the public) about charities, and charities with information about charity law.

With regard to registration, the government agrees with the PASC against Hodgson that the threshold for compulsory charity registration should not be raised to £25,000. This is because it believes that small charities should be required to register to help protect the reputation of the charity sector as a whole and that any benefits of raising the threshold would be outweighed by the potential impact on public trust in charities. In fact, the government favours the introduction of voluntary registration for those charities that are not required to be registered whilst recognising that this would require a prior feasibility and cost benefit study with the Charity Commission.

Perhaps the most eagerly awaited section in the government's response is to recent criticism and legal disputes relating to public benefit and charitable status following which the PASC recommended statutory definition of public benefit.

The government accepts that there has been a lack of certainty in relation to religious charities and public benefit following the Charities Act 2006, and that the PASC's recommendation to review ministerial intent behind the statute would be reasonable in the light of persisting ambiguity. It agrees that it is for parliament, not the Charity Commission or the government of the day, to define the criteria for charitable status, including what is meant by "public benefit" and that it is for the Charity Commission, not for parliament or the government, to determine whether organisations meet those criteria in individual cases.

The government believes that it was inevitable that the Charity Commission's interpretation of case law would be challenged through the tribunal or courts and that such challenges would arise in relation to education, religion, or poverty relief, which were widely considered to benefit from a presumption of public benefit prior to the Charities Act 2006. The government insists that part of the purpose of creating the Charity Tribunal was to facilitate the development of charity case law. It observes that the Upper Tribunal has already provided clarification of the law relating to public benefit and education for example in the recent Independent Schools Council case. It recognises that these cases have proved costly for the charities involved, and that the Charity Commission has invested major resources in its approach to public benefit and the resulting legal cases. However, it considers that it is up to the charities concerned to make their own choices about their representation. It also points out that the Tribunal has no power, nor should it, to control the parties' legal costs in proceedings that come before it. The Tribunal Procedure Rules are designed to allow processes to be flexible so that they can accommodate a range of litigants - from those who choose to represent themselves through to those who choose to employ a full legal team.

With specific reference to the controversial proceedings involving the Charity Commission and the Plymouth Brethren Christian Church the government welcomes the stay in proceedings aimed at encouraging attempts to resolve the matter through dialogue. However, it insists that if this proves unsuccessful the case will rightly return to the Tribunal for a decision. The government concedes that whilst there are clearly worrying issues for the small number of organisations involved, the concerns that have been raised about public benefit need to be considered in the context of the charity sector as a whole and that with the registering of over 6,000 new charities each year the vast majority pose no problem regarding public benefit. This includes the religious charitable sector which the Charity Commission says experiences little difficulty in submitting annual reports on public benefit.

Against the PASC, the government accepts Lord Hodgson's recommendation not to pursue a statutory definition of public benefit at the present time though it does not rule out the possibility of change in light of developments in case law. It considers that although recent cases before the Tribunal have caused much anxiety for some groups of charities the case law definition of public benefit has served society well for over 400 years. The main argument against statutory definition is that no one has yet been able to adequately describe what a statutory definition would be and that the diversity of charitable purposes and activities means that the case law is too complex to encapsulate in a simple statutory definition. The government therefore believes that the Charity Commission's public benefit objective should remain in place. However, it considers that this should not be such a significant focus of the Charity Commission's resources when compared to its other core regulatory objectives.

The PASC insisted that parliament should legislate to clarify what it regarded as 'the flawed legislation on the question of charities and public benefit.' However, the government rejects this recommendation.