The Charity Commission is expecting to order one or two charities a year to close down under the new powers it would gain from the Charities (Protection and Social Investment) Bill, according to Rob Wilson, the Minister for Civil Society.
Speaking during the House of Commons Public Bill Committee debate on the legislation, Wilson said the new power would ensure charities that had been found to be sham charities or were being abused, could not be reactivated to continue the abuse at a later date.
The commission currently has the power to transfer a sham charity’s funds and assets to a legitimate charity with the same charitable purposes as well as removing and disqualifying trustees.
But it is not legally able to wind up what Wilson called "the empty shell" of the charity, because that would be acting in the administration of the charity, so the new power would enable the commission to direct trustees to wind it up themselves.
When asked by committee member Wes Streeting, the Labour MP for Ilford North, what the scale of the problem was, Wilson said: "The commission estimates it will be exercised on only one or two occasions each year... and it is subject to a range of safeguards."
There would be "a high bar for the commission to make the case for winding up" he said, but it would be "a useful tool in the Charity Commission’s armoury".
"The power to direct winding up will only be available in the context of a statutory inquiry and where the commission is satisfied that there is misconduct, mismanagement or risk to charity property," he said.
"The commission must be satisfied that the charity does not operate or that its charitable purposes could be more effectively promoted if it were to cease to operate and that the exercise of this power is expedient in the public interest," he said.
All the Charity Commission’s powers must be exercised in line with the commission’s duty to regulate in a way that was "proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed", he said.
Anna Turley, the shadow minister for civil society, said the power was an important one for the commission, which the Labour party supported.
She said: "I was reassured to hear that it is expected to use the power only one or two times a year."
But she warned a burden of decision making and judgement was being placed on the Charity Commission, requiring it to behave as an arbiter of public interest.
"I do not doubt that it will perform that duty admirably, but we must be conscious that we are asking it to make another judgement call," she said.
"That risk should be looked at in the context of an environment in which the commission is under pressure to take action on charities that are threatening public trust and confidence, and to be seen to do so."
She highlighted the recent case in the High Court brought by the advocacy group Cage after the commission sought assurances that the Joseph Rowntree Charitable Trust would never fund Cage again as an example of "how easy it is for the commission to take precipitate and potentially disproportionate action".
She said: "I sincerely hope that the commission will use its customary wisdom and good judgement in making these decisions."
The committee debate on the bill, which will also give the commission the power to issue statutory warnings, ban those convicted of terrorism and sexual offences from holding trusteeships and make it easier for charities to make social investments, will be resumed on 5 January.