CHARITY LAW: FOR THE PUBLIC BENEFIT

Patrick McCurry

But Stalker wants to keep up pressure on the Government. "The Charities' Coalition is important because there are big names involved and it keeps the issue in the minds of politicians and the public."

CASE STUDY: FRIENDS OF THE EARTH CONSIDERS IMPACT OF CHANGE IN LAW

Friends of the Earth is made up of two legal entities - a charitable trust involved in education and research and a company limited by guarantee that carries out campaigning.

Communications director Alison Wallace says that since the organisation campaigns for changes in the law, it can not transfer all of its campaigning into a charity under the new definitions.

"We will probably always separate some of our campaigning from the charity because we want to retain independence from the Government, which is responsible for the regulatory framework of charities," she says.

However, bringing its campaigning work under the charitable arm would bring significant financial benefits.

"We have 100,000 regular supporters paying donations to our campaigning arm that we cannot reclaim the tax on because it's not a charity," she says.

Nevertheless, the Strategy Unit's recommendation that the Charity Commission take a less cautious stance on human rights campaigning means it is possible that Friends of the Earth will be able to move part of the work carried out by its campaigning arm into the charity.

"We may expand the charitable side of our work but it will never take over from our campaigning activity," says Wallace.

NEW DEFINITION OF A CHARITY

The Strategy Unit's report states that a charity should be defined as an organisation which provides public benefit and has one or more of the following purposes:

tabular

CASE STUDY: BRIGHTON COLLEGE FOSTERS COMMUNITY LINKS

Private school Brighton College is a charity and prides itself on its progressive approach to links with the local community. Headmaster Anthony Seldon believes it would have little problem demonstrating its "public benefit" under the Strategy Unit's proposals.

The school is involved in partnerships with local state schools, allows people from the local community to share its facilities, such as the swimming pool, and offers bursaries to children who cannot afford full fees. It also allows other charities to use its facilities at cost price.

"We do this because we were founded to do good work," says Seldon.

He adds that it is important that the school's pupils are involved in activities in the community. "Otherwise they would turn out to be extremely self-centred."

Seldon says he agrees with the proposed public benefit test. "There should be an onus on independent schools to demonstrate public benefit and, to be fair, most of them are involved in such activities but sometimes don't like to boast about it."

In some cases, he adds, independent schools are keen to establish partnerships with state schools but are prevented from doing so by opposition within the state sector.

Seldon was co-author of a report on partnerships involving private schools, commissioned by the Institute for Public Policy Research and published last October.

"Independent schools need to be seen to be involved in the local community in a meaningful way," he says. Seldon gives proceeds from his writing to help children who cannot afford full fees at the school.

The definition of charitable status could change after 400 years. Patrick McCurry looks at what it may mean for campaigning charities and the sector as a whole.

Home Secretary David Blunkett may not be every charity's favourite politician after he followed the Daily Mail in criticising the Community Fund last autumn. But his support for a shake-up of charity law last month was welcome.

Blunkett said he wanted to see early implementation of the proposals in the Government's Strategy Unit report and called on the sector to keep up pressure for a new law to be contained in the Queen's speech at the end of this year.

Probably the most important recommendation in the report was for the antiquated law governing charitable status to be updated and a new "public benefit" test brought in.

It's a controversial area because it could potentially affect some private schools and hospitals that have for centuries enjoyed charitable status.

It could also allow some groups that are not able to gain charitable status to do so.

The classification of charitable purposes dates from 1601. It falls under four heads: relief of poverty, advancement of education and of religion and other purposes beneficial to the community.

The Strategy Unit said this was outdated and did not reflect the full range of charitable activities today. It wants to replace this with 10 categories, including advancement of health, amateur sport and environmental protection, as well as recommending that every organisation should demonstrate public benefit before gaining charitable status.

Andrew Phillips, a charity lawyer at Bates Wells & Braithwaite, welcomes the proposal. "I'm normally suspicious of any statutory definition of charity but these proposals could be helpful," he says.

The Strategy Unit has put down guidance that will be interpreted by the courts and Charity Commission, rather than trying to pin down exactly which organisations can become charities, he says.

This should prevent the government of the day being able to decide which kinds of organisations should have charitable status and which not. "The main point is to keep the politicians' sticky hands off charities because otherwise they could become a political football, which would be fatal to the public perception of charities," he says.

But not everyone agrees that the proposals will lead to a fairer system.

Nigel Scott, treasurer of Student Action for Refugees and of family planning charity Population Concern, is worried. The man on the street will probably not consider refugees, asylum seekers or family planning as necessarily charitable, says Scott. "So who decides what is the public and what is in their benefit?"

He adds that causes such as homelessness or sexual health, where there may be less public sympathy or which cross into moral areas, could suffer.

Scott argues that the creation of a new regulator to replace the commission could threaten the independence of the process.

Pointing to concerns about the independence of lottery grants following the planned merger of the Community Fund and New Opportunities Fund, Scott is concerned that the body replacing the commission could come under government pressure. "Will we end up with the government of the day deciding what is of public benefit?"

But Malcolm Lynch, a charity lawyer at Wrigleys, disagrees. He argues that the changes will make trustees think more carefully about what they are doing, rather than simply assuming they are providing a public benefit.

"They will have to be more rigorous in stating what they are doing," he says, adding that this increased transparency is already under way.

"For example, the commission wrote to the big charities last year calling on them to improve their annual reports."

Another question is how will public benefit be judged. Chief charity commissioner John Stoker expects the legislation to give more detail on the criteria and how it will work in practice. "Everyone needs to be clear about what organisations are being judged on," he says.

So will the new legislation, if and when it goes through Parliament, result in a cull of existing charities?

Most lawyers believe not and the Strategy Unit's report itself suggests that it is unlikely many charities will lose their status. For example, in the case of private schools and hospitals, the report says that they should provide access for those who would be excluded because of the fees.

"For example, to maintain their charitable status, independent schools which charge high fees have to make significant provision for those who cannot pay full fees and the majority probably do so already," states the report.

Anne Marie Piper, a charity lawyer at Farrer & Co, says the Strategy Unit's intention is that private schools demonstrate their public benefit but that it is not intending them to lose charitable status. "I don't believe the changes will have any immediate effect in terms of removing charitable status from organisations, except perhaps in the case of a few private hospitals," she says.

Chris Stalker, head of campaigns at NCVO, which was calling for a public benefit test long before the report, agrees. "It is unlikely we'll see a large number of charities losing their status as the Government wants any new regulatory regime to have a 'light touch'."

Stoker says that issues such as what to do with the assets and resources of a charity will need to be tackled for organisations that face being struck off the charity register. "We'd need to find a home for the assets and resources of the organisation so they are used in line with the purposes they were provided for," he says.

There has been speculation that changes in the law could lead to charitable status for some campaigning charities that are now denied it. But it is not quite that simple.

In advance of the report, the commission had appeared to soften its stance on human rights campaigning, by issuing new guidance allowing the promotion of human rights as a charitable purpose.

But this was regarded as not going far enough. Human rights charities were irritated that the commission didn't consult with them before its decision and that a charity could not promote human rights in a country where they are not enshrined in local law.

"That meant you wouldn't have been able to operate in those countries where human rights campaigning was most needed," says one campaigner, who asked not to be named.

Stoker agrees this is an "oddity" which may be tackled in the final legislation as well as some of the complex case law.

Although the report includes promotion of human rights in its list of 10 new charitable objectives, it notes that organisations with "political objects" cannot be charities. This extends to organisations formed with the purpose of lobbying for changes in the law.

But the Strategy Unit calls on the commission to revise its guidelines on campaigning because they are too restrictive. "The guidelines are written in a somewhat cautionary style which could be said to overplay the potential difficulties of campaigning work," says the report.

So it seems that, under the changes, there will only be limited opportunity for campaigning organisations to become charities.

Many groups are already split in two with a charity that carries out charitable work and a company that does the campaigning. A Liberty spokesman says: "We are affiliated with the Civil Liberties Trust, which is a charity, but Liberty will continue to campaign for changes in the law and is political with a small 'p' so we will be excluded from the changes."

However, Stalker says some organisations will be helped. He gives an example of an organisation in Northern Ireland involved in building bridges between communities. "They are excluded from charitable status but, under the new definition, conflict resolution is regarded as charitable and so they would be able to gain charitable status."

A key question in all this, of course, is whether and when the Strategy unit's proposals will become law.

NCVO has helped launch the Charities' Coalition, a collection of high-profile organisations that want to see new legislation included in the next Queen's speech in November.

There are concerns that if that deadline is missed, impetus could be lost and, with the Government approaching the next general election, it may be too late to bring in new laws.

Stalker says some scepticism about how quickly the Government will move is welcome because it enables the voluntary sector to keep up the pressure on ministers. But he is hopeful that progress can be made in time, pointing not only to Blunkett's speech, in which he promised to introduce a bill on charity reforms, but also to comments from Home Office minister Lord Filkin, made last month.

There could be a single announcement from the Government in the coming weeks in which both the new bill and the response to the consultation are covered, or there could be two separate announcements covering each issue, he says.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Cyber and data security - how prepared is your charity?

With a 35 per cent rise in instances of data breaches in Q2 and Q3 last year, charities must take cyber security seriously

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now