Large charities should be allowed to pay trustees without permission, says Hodgson

The issue is divisive, says Tory peer in his review of the Charities Act 2006, but charities above £1m income should not have to seek Charity Commission approval

Charity Commission
Charity Commission

Charities with incomes above £1m should be permitted to pay their trustees without getting permission from the Charity Commission, and all charities should be encouraged to reimburse trustees’ expenses, the Hodgson review says today.

It says payment is "a hugely divisive issue in the charity sector", with some saying it undermines the voluntary sector and others saying it would improve diversity and attract those with special skills.

The review’s own research found 61 per cent of respondents thought trustees should not be paid, although 47 per cent of younger people and 22 per cent of over-65s thought they should be paid.

But on balance, the review says, charities falling into its definition of ‘large’ – an income of more than £1m – should be allowed to pay trustees, with full disclosure of details in their annual reports. Others would continue to have to seek permission from the Charity Commission, as all charities have to do at present.

Meanwhile the government should work on reducing red tape for trustees, the commission and sector bodies should promote best practice on trustee recruitment, and businesses should be encouraged to support trusteeship among employees.

Trustees, like company directors, should be limited to serving three terms of three years, the review says, in order to tackle lack of rotation among board members.

There should be no statutory definition of public benefit, the review says, and it would be sensible to wait and see how the new guidance on public benefit, recently published by the commission after a judgment by the Upper Tribunal, plays out.

But charities should recognise the importance of public benefit reporting, stressing the impact rather than the process of their work, and the commission should find ways of drawing public attention to public benefit reporting.

There should be no change to the list of charitable purposes in the current law, says Hodgson, but the commission should consider providing a single piece of guidance setting out how it defines each charitable purpose, how it applies those definitions, and giving model objects for charities.

The review does not recommend that there should be a single definition of charity at this stage for the three UK charity jurisdictions – England and Wales, Scotland, and Northern Ireland – but such a definition would be desirable in the long run.

But it does recommend continuing public debate about the boundaries and definition of charity: "Is a charity with no volunteers still a charity? How about one where all its funding comes from the state through delivery of public services? Or one where the primary regulator is a government department, directly or via an agency? Lastly, how do fee-charging institutions fit with the popular conception of  a ‘charity’ regime?"

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