Analysis: Watchdog under scrutiny after the Cup Trust scandal

Sir Stuart Etherington's criticism of the Charity Commission is endorsed by some, but not all

Charity Commission
Charity Commission

Sir Stuart Etherington’s outspoken attack on the Charity Commission in the wake of the Cup Trust tax-avoidance scandal has opened up a debate on the effectiveness of the regulator and whether its actions have damaged public confidence in charities.

The chief executive of the National Council for Voluntary Organisations told a conference organised by the Association of Charitable Organisations that a "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".

Sir Stephen Bubb, head of the chief executives body Acevo, who said the regulator had a "lot of questions to answer" after the Cup Trust story first broke in January, echoes Etherington’s comments. "The Charity Commission has failed," says Bubb. "Its handling of the Cup Trust case is disappointing."

He says that public trust in charities has been affected by the case because the regulator did not act sufficiently swiftly. "Bogus and fraudulent charities reduce public trust in charity generally," says Bubb. "It is essential that the regulator is capable of acting quickly and effectively against any organisations found to be abusing the privilege of charitable status. It did not do so. It is time it got its house in order."

Iona Joy, head of charity effectiveness at the charitable think tank New Philanthropy Capital, says in a blog post that the commission claims that attacking bad practice in public can contaminate the entire charity brand, whereas in most sectors coming down hard tends to inspire confidence.

"A regulator baring its teeth when trust is breached will make the public feel more secure rather than less," Joy says. "A feeble regulator doesn’t inspire confidence.

"We’d like the regulator to follow the spirit of the law, rather than look for excuses to sit back, legal uncertainties notwithstanding."

Joe Irvin, chief executive of the local infrastructure body Navca, agrees with Etherington, but says there is hope that the commission can be redeemed. "He is absolutely right to say that the Charity Commission has threatened public trust in charities and that it has a lot to do to regain the faith of the sector," he says.

"But it is not all doom and gloom for the commission. All charities, from modest community groups to multi-million-pound organisations, need a commission that can nurture public trust. This means charities will want to help the commission put things right. The commission needs to admit it got this wrong, dust itself down and then look at how it can better tackle rogue charities."

John Low, chief executive of the Charities Aid Foundation, has sympathy with Etherington’s view, but says the commission has been put in a difficult position.

He says that apart from dealing with large cuts to its budget – which is falling from £29.3m in 2010/11 to £21.3m in 2014/15 – the regulator has also had to devote important resources to adjusting to the advent of the charity tribunal. Despite this, he says, the commission is regularly held up round the world as an example of how to do charitable regulation.

He also takes issue with Etherington’s comment that the regulator lacks the bravery to defend charity, particularly in cases where there is risk of political controversy.

"I am not sure I want my regulator to be brave," says Low. "The commission does have to provide leadership in difficult situations, but the task of regulation often requires it to work quietly, which makes it difficult to go public on things."

Jay Kennedy, director of policy and research at the Directory of Social Change, agrees with Low that the commission is in a difficult position and says that one bad case does not necessarily mean the regulator has failed. "Does this case prove that we have a regulator that is not up to the task?" he asks. "I don’t think that it does."

Nick Hurd, the Minister for Civil Society, says he’s been shocked by the Cup Trust affair and is worried about the ripple effect. "Two very large rocks have been chucked into the Charity Commission’s pool – that and the parliamentary reaction to the Plymouth Brethren case," he says. "The effect has been pretty seismic. At the same time, it hasn’t created a storm of inquiry and, although there might be some fraud and bad practice in the sector, it’s absolutely at the margins.

"But this might be the catalyst for the commission to review its processes root and branch – our feeling is that in the past it has tried to do too much, and we want it to hunker down on its core function.

"It has got to use the opportunity to review what it does and what it should focus on, and I’ve every confidence that William Shawcross and his new board will do that."

Sarah Atkinson, head of information and communication at the commission, says the regulator’s strategic plan sets a clear direction for it. "The strategic plan prioritises our role in tackling abuse and non-compliance, and promoting accountability in the sector," she says. "Despite significant cuts to our budget over recent years, we are confident that we are meeting the aims set out in that plan and are pleased that the sector generally acknowledges this."

Atkinson adds that the regulator, like all organisations, needs to improve and learn. The commission intends to do this, she says, in part by listening to the views of sector leaders.

- Read our assessment of the new appointees to the Charity Commission's board

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