Comment: It's far too easy to use the loopholes

Towards the end of last year it was revealed that a dozen of the country's best-known banks were levying funds using trusts that have charitable status but rarely give anything to charity.

Nick Seddon
Nick Seddon

Standard Life's trust, for instance, operates "for the benefit of charities involved in the domestic and international wellbeing of children"; but the bank would not identify these charities and acknowledged that it had not paid them any money. The Charity Commission is talking to those involved.

Among scandalised commentators, John McFall, a Labour MP and chairman of the Commons Treasury Committee, portrayed this as verging on identity theft. He was right to highlight the issue of identity. Not surprisingly, the story was plastered across the front page of The Guardian. The mainstream press - perhaps as a proxy for the general public - tends to be interested in two things: raising money for good causes and threats to the integrity of the charity brand, or abuses of trust.

So here is a warning. Charity law is easy enough to exploit without the public-benefit test making it easier still. If the values that unite charities are distinctive - and symbolically valuable - then the good name of charity must be protected. The commission should therefore seek to raise the bar, not to lower it.

One frontier case concerns Great Ormond Street, Britain's leading children's hospital, which is trying to set up a charitable arm to deal with legal limitations on private patient income. It wants to become a Foundation Trust - incidentally, the word 'trust' does not here denote a charitable trust - and gain greater financial freedom. But to become a Foundation Trust it must reduce its private income by an estimated £8m, which it is not keen to do. But if it could create a charity to make a profit from private patients, which would then be farmed back into the hospital ...

In truth, it will be hard for the Charity Commission to stop the establishment of such a profit-making charity, because plenty of charities already have trading divisions that make profits. But still broader questions must be answered for us: how can we maintain trust in trusts? What can be done to stop charity being little more than a loophole in the law?

- Nick Seddon is an author and journalist: nptseddon@hotmail.com.

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