The Charity Commission’s actions in the Cup Trust tax-avoidance scandal have brought "damage and disrepute" to the sector and might have harmed public trust in charities, according to Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations.
In a speech this afternoon at a conference in London organised by the Association of Charitable Organisations, Etherington will say that the "complete lack of intervention by the commission in this whole affair has brought damage and disrepute to the sector as a whole, putting us at serious risk of losing the trust and confidence of the public".
He will say that the regulator has some fundamental questions to answer, in particular over its leadership and strategy.
"Many of us in the sector sense that there is currently a lack of direction within the commission, as if it is struggling to commit to its compliance role, following years of being much more consumer-focused," he will say.
Etherington will also say that the commission has shown a "disappointing lack of bravery to defend charity, and a certain unwillingness to take a stronger position if this would risk using any political capital".
The commission was criticised by MPs on the Public Accounts Committee for its lack of action over the Cup Trust, which raised more than £176m in private donations but spent just £55,000 on good causes over two years.
Etherington will tell the conference that the performance of senior Charity Commission representatives in front of the committee in March "raised serious concerns about the regulator’s handling of the case, and more generally about its operation".
The commission’s credibility as an effective regulator has been seriously undermined, he will say, and he fears it has lost the respect of the sector, "with many reviving accusations that it is a paper tiger – not so much a light-touch regulator as a no-touch regulator".
Most of the frustration he has encountered from people in the voluntary sector about the Cup Trust case is with the Charity Commission, Etherington will tell the conference.
"What was so obvious in the Cup Trust case is how a legalistic approach dominated common sense, meaning that decisions were made following the letter of the law rather than the spirit, no matter what disastrous consequences this caused," Etherington will say.
"It seems that, in the case of the Cup Trust, the commission was so concerned about what it couldn’t do that it didn’t do what it could do."
But he will say that the existence of the commission as an independent regulator of charities is of "paramount importance" and there is "no appetite whatsoever to transfer its functions elsewhere".
Etherington will tell the conference that the commission is the best organisation to regulate charities and caution against knee-jerk reactions such as imposing a requirement that charities spend a certain amount every year on charitable activities.
He will say that the commission has been used in recent years as a political football and has had to deal with "unfair accusations of following its own biased agenda, as well as being constantly targeted by certain parts of the press. I am confident the commission will get through this rough patch and establish itself once again as the proper custodian of confidence in charities."