House of Commons Public Administration Select Committee The role of the Charity Commission and “public benefit”: Post- legislative scrutiny of the Charities Act 2006 Third Report of Session 2013–14 Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/pasc Ordered by the House of Commons to be printed 21 May 2013 HC 76 [incorporating HC 574-i-vi, Session 2012-13] Published on 6 June 2013 by authority of the House of Commons London: The Stationery Office Limited £23.00 The Public Administration Select Committee (PASC) The Public Administration Select Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration and the Health Service Commissioner for England, which are laid before this House, and matters in connection therewith, and to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service. Current membership Mr Bernard Jenkin MP (Conservative, Harwich and North Essex) (Chair) Alun Cairns MP (Conservative, Vale of Glamorgan) Charlie Elphicke MP (Conservative, Dover) Paul Flynn MP (Labour, Newport West) Robert Halfon MP (Conservative, Harlow) David Heyes MP (Labour, Ashton under Lyne) Kelvin Hopkins MP (Labour, Luton North) Greg Mulholland MP (Liberal Democrat, Leeds North West) Priti Patel MP (Conservative, Witham) Mr Steve Reed MP (Labour, Croydon North) Lindsay Roy MP (Labour, Glenrothes) Powers The powers of the Committee are set out in House of Commons Standing Orders, principally in SO No 146. These are available on the Internet via www.parliament.uk Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/pasc Committee staff The current staff of the Committee are Emily Commander and Catherine Tyack (Joint Clerks), Rebecca Short (Second Clerk), Alexandra Meakin (Committee Specialist), Paul Simpkin (Senior Committee Assistant) and Su Panchanathan (Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Public Administration Select Committee, Committee Office, First Floor, 7 Millbank, House of Commons, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5730; the Committee’s e-mail address is [email protected]. The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006 1 Contents Report Page Summary 3 1 Introduction 5 2 Background to the Charities Act 2006 8 3 The Charity Commission 10 Charges 13 4 Registration 16 5 Public Benefit 21 Parliament, public benefit and the 2006 Act 23 The charitable status of the Plymouth Brethren (or Exclusive Brethren) 25 Plymouth or “Exclusive” Brethren 25 The Preston Down Trust and the Charity Commission 26 A statutory definition of public benefit? 30 6 The Charity Tribunal 32 7 A charity ombudsman? 34 8 Fundraising 36 House-to-House collections 39 9 Payment of trustees 41 10 Political campaigning and independence 43 The charitable status of think tanks 46 11 Conclusion 50 Conclusions and recommendations 52 Annex 60 Appendix A 62 Letter from Attorney General to Chair of PASC, dated 6th January 2013 62 Letter from Attorney General to Chair of PASC, dated 19th March 2013 63 Appendix B 64 Written evidence submitted by Garth Christie 64 Formal Minutes 65 Witnesses 66 2 The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006 List of printed written evidence 67 List of additional written evidence 67 List of Reports from the Committee during the current Parliament 72 The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006 3 Summary The charitable sector is at the heart of UK society, with £9.3 billion received in donations from the public in 2011/2012, and around 25 new applications for charitable status received by the Charity Commission every working day. The regulation of the charitable sector in England and Wales dates back to the 1601 Statute of Charitable Uses which set out the first definition of charity in English law and the purposes for which a charity could be established. While further legislation and case law emerged over time, at the start of the 21st century the definition of a charity remained largely unchanged from 1601. The Charities Act 2006, on which we have conducted post-legislative scrutiny following a thorough and welcome review by Lord Hodgson of Astley Abbotts, sought to “provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society; to encourage a vibrant and diverse sector, independent of Government; and to sustain high levels of public confidence in charities through effective regulation”. We have concluded that, while the Act has been broadly welcomed by the charitable sector, it is critically flawed on the issue of public benefit. The Act stated that “it is not to be presumed that a purpose of a particular description is for the public benefit”. While it is arguable that such a presumption was in place prior to 2006, the stated removal of the presumption, the failure to define “public benefit” and the requirement for the Charity Commission to produce public benefit guidance, left the Commission, a branch of the executive, in an impossible position. This was evidenced by the Commission’s costly legal battles with the Independent Schools Council and the Plymouth Brethren Christian Church (or Exclusive Brethren). While we have criticised the interpretation of the law by the Charity Commission, we also believe that it is essential for Parliament to revisit this legislation and set the criteria for charitable status rather than delegating such decisions to the Charity Commission and the courts. We have also considered the impact of face-to-face fundraising, or chugging, and warned that self-regulation has failed so far to generate the level of public confidence which is essential to maintain the reputation of the charitable sector. We have called for ministers to revise the statutory objectives for the Charity Commission, to allow the Commission to focus its limited resources on regulating the sector; rejected the proposal of Lord Hodgson to increase the financial threshold for compulsory registration of a charity with the Charity Commission; and called for charities to publish their spending on campaigning and political activity. We believe our recommendations will help to maintain public trust in charities and the Charity Commission, and promote the good work of charitable organisations in 4 The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006 communities across the country. The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006 5 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 1 “UK Giving 2012”, Charities Aid Foundation, www.cafonline.org, p 5 2 “Charity law and regulation”, Cabinet Office, 7 May 2010, cabinetoffice.gov.uk 3 Charities Bill [HL], Standard Note SN/HA/6159, House of Commons Library, December 2011 4 Charities Act 2006, section 1 5 Ibid. section 2-3 6 Ibid. section 3, 7 7 Ibid.