The Charities Act 2006 is "critically flawed" on the question of public benefit, according to the final report of a parliamentary committee’s investigation.
The Public Administration Select Committee report, published today, says that the act removed the presumption of public benefit from religious, educational and anti-poverty charities and required the Charity Commission to create guidance on public benefit, but did not give a definition of public benefit.
It says the changes in the act left the Charity Commission in an "impossible position" and led to costly charity tribunal cases involving independent schools and religious charities.
"In this respect, the Charities Act 2006 has been an administrative and financial disaster for the Charity Commission and for the charities involved, absorbing vast amounts of energy and commitment, as well as money," the report says.
"Ultimately the Charities Act 2006 is critically flawed on the question of public benefit and should be revisited by parliament."
The report says that parliament should reinstate the presumption of public benefit for charties for the advancement of education, religion and the relief of povery that was considered to exist before the act, and should remove the Charity Commission’s statutory objective to "promote awareness and understanding of the operation of the public benefit requirement".
It quotes Lord Hodgson of Astley Abbotts, who last year completed his review of the Charities Act 2006, as saying that the commission had been given a "hospital pass" and that the question of defining what was and was not a charity should be settled by parliament.
"In our view, it is for parliament to resolve the issues of the criteria for charitable status and public benefit," the report says. "If the government wishes there to be new conditions for what constitutes a charity and qualifies for tax relief, it should bring forward legislation, not leave it to the discretion of the Charity Commission and the courts."
Bernard Jenkin, chair of the PASC, told Third Sector: "We should never have opened up the whole can of worms called public benefit. Parliament needs to legislate, because the time and money being wasted suggests the act as it stands is not well-drafted and needs to be amended.
"The stated intention of the Labour government, which introduced the Charities Act, was that there should be no change in the law. But there was a requirement on the commission to produce guidance. It is that guidance which has led to these problems," he said.
"The commission should be focusing on regulation, not engaged in the sort of litigation which eats up time, resources and money, which these changes have led to."