It's time for clarity and stability over public benefit

The Charity Commission has spread confusion, says Nicola Evans, senior associate at Bircham Dyson Bell

Nicola Evans
Nicola Evans

In July, the Charity Commission published public benefit assessments of 12 charities. It concluded that three did not meet the public benefit requirement, sparking further controversy in the ongoing debate about this prickly topic.

Some press coverage continues to imply that the Charities Act 2006 made radical changes in charity law, introducing a new definition of the concept and tough requirements for charities to prove that they provide public benefit. This perception seems to be based on the commission's public benefit guidance.

In fact, the Act required the commission only to issue guidance on and promote awareness and understanding of the public benefit requirement, a statutorily-defined term referring to the historical requirement that, in order to be charitable, a purpose must be "for the public benefit". The only change to the law made by the Act is that it is now not to be presumed that a purpose of a particular description is "for the public benefit".

This, arguably, only affects charities established for the relief of poverty or the advancement of religion or education, which historically had the benefit of such a presumption - although they were never exempt from the requirement itself; the presumption was rebuttable.

The commission's guidance could have made this clear. Having dealt with the legal requirements, it could have gone on to set out best practice guidance for trustees on pursuing their charities' purposes, encouraging maximum access to benefits. It could have increased public trust and confidence in the sector by noting that charities tended to do this because they wanted to, not because they had to.

Disappointingly, though, it suggests - as commission chief executive Andrew Hind stated in a recent letter to The Times - that the Act "required all charities to operate for the public benefit". It suggests that this is part of the public benefit requirement, confusing the legal definition of a charity - and, hence, charitable status - with the way charity trustees pursue their charities' purposes. A requirement also to operate for the public benefit, similar to the requirement to "provide" public benefit in Scotland, would have been a significant change in centuries-old charity law and could have been included in the Act. But it was not.

After last year's consultation, the commission acknowledged significant challenges to its approach, but published the guidance anyway. In principle, this need not matter: it is only guidance and charity trustees are obliged only to "have regard" to it. However, the commission is now assessing registered charities on the basis of the guidance alone; the law has been neatly sidestepped.

The commission states that its assessment decisions are final and not subject to appeal. The assessment reports require action by trustees, but fail to identify the authority for this requirement. In response to a Freedom of Information request asking to identify the power being exercised, the commission has stated that it is "acting in furtherance of our general objectives and functions, indicating actions which it is clear to us must be taken". This, disturbingly, confuses an organisation's objectives and functions with its powers, and fails to clarify the basis for the commission's actions.

The commission is bound to act within the law, just like any trustee. Changing the law is the role of Parliament. The commission denies it is changing the law, yet refrains from testing its guidance in the courts. Trustees are left in confusion, unsure whether they should spend charity funds trying to pass the regulator's test and unclear what would be sufficient to do so.

Perhaps it would now be 'for the public benefit' that any further public money to be spent on all this should be applied to restoring some clarity and stability.

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