The Big Issue: Regulator's powers under scrutiny in Cage episode

Was it within its rights to require two charities never to fund the organisation again? Andy Hillier reports

In November Nick Perks, the secretary of the Joseph Rowntree Charitable Trust, told a London conference in response to a question that he feared the Charity Commission's recent stronger emphasis on regulation could deter charities from taking risks and grant-makers from funding them.

In fact the watchdog had, the previous December, opened a regulatory compliance case on the JRCT's earlier funding of the controversial human rights group Cage: at the time Perks was speaking, everyone concerned thought the assessment was over and all that remained was the production of a report.

At the end of February, however, the Islamic State executioner "Jihadi John" was identified as Mohammed Emwazi, who was described by a Cage representative on television as a "beautiful young man" who might have been radicalised by the security services; and the Daily Mail published a story about the funding of Cage by both the Roddick Foundation and the JRCT, which has funded other causes that have been seen as controversial.

Undertaking not to fund

The commission immediately contacted both charities to ask for an undertaking that they would never fund Cage again. The Roddick Foundation, which was also already the subject of a regulatory compliance case, did so straight away. The JRCT confirmed immediately that it had no plans for further funding, but did not at first want to rule it out for all time; it did so, however, after what it later called "intense regulatory pressure".

The commission said in a statement that it was concerned such funding risked damaging public trust and confidence in charities, adding that it expected trustees to ensure that all funding was used according to a charity's purposes "and in the way the public would expect". It would conclude its cases on the two charities and publish reports shortly, it said, together with lessons for other charities that funded non-charitable bodies such as Cage.

The statement has caused widespread concern over the questions of whether the commission has powers to fetter the discretion of trustees in this way, and over who should decide what the public would expect. A letter in support of the JRCT, signed by 190 people, including the actor Joanna Lumley and a large number of charity chief executives, was published in The Times, supporting "the rights of charities and foundations to freely pursue their objectives within the law".

The Association of Charitable Foundations, of which the JRCT is a member, will meet the commission shortly to discuss issues raised by the case. Amanda Jordan, chair of the ACF, says she wants to establish whether the commission was acting within its powers when it insisted on an undertaking never to fund Cage again.

Sylvie Nunn, a partner and charity specialist at Wrigleys Solicitors, agrees that the case raises questions about the commission's powers. "The boundary between stepping into trustees' decision-making and protecting public trust and confidence is quite a difficult one," she says. "I just hope that the commission has got solid information that there is some issue with Cage. Otherwise, telling trustees to fetter their discretion would be troubling."

Andy Gregg, chief executive of the charity Race on the Agenda and a signatory of the letter to The Times, says he believes the commission overstepped the mark. "I have had concerns about the commission since the appointment of William Shawcross as chair," he says. "In our view, he is ideological rather than independent.

"I'm no advocate for Cage, but it has to be the case that charities need to have discretion about who they fund. The notion that if things go wrong they will be made a scapegoat and end up on the front page of the Daily Mail seems dangerous to civil society."

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