News in focus: Pre-scrutiny views on the details of the Charities Bill

The draft Charities Bill, the first attempt to update charity law since Elizabethan times, extends the list of charitable purposes to 13 and includes a public benefit test criterion. Joe Gill outlines the key points.

At more than 230 pages, the devil in the Charities Bill is certainly in the detail, and now the scrutiny of those pages begins in earnest.

The Bill has enjoyed widespread support from the sector following extensive government consultation, but there are a number of areas that will be a source of conflict.

Charitable purpose, public benefit

Instead of the old charitable purposes of relieving poverty, providing education and advancing religion, the Bill introduces a new set of 13 charitable purposes. Charities will now have to prove their charitable purpose through a 'public benefit' test, using case law dating back to the orginal Elizabethan act.

"The Government is not going to define public benefit, it is going to rely on the concept as it has been assumed in the case of religious and education charities," says charities lawyer Stephen Lloyd.

"Now, charities advancing other purposes of benefit to the community, such as the arts or health, can get charity status."

The Government will leave it to the Charity Commission to rule on public benefit, and the commission will no doubt produce regulations and guidance on this, says Lloyd. "The Bill hands the commission quite a lot of power and that may raise some questions."

Whether or not many of the campaigning organisations will want to become charities is doubtful. "There is a trade-off between the tax advantages and the benefits of being an independent campaigning organisation, which charitable status may restrict," says Lloyd.

Animal welfare, environmental protection, human rights, and amateur sports are among the new purposes. However, as Belinda Pratten, policy officer at the NCVO explains: "The Government is not going to change guidance on the limits of political activity. It still draws a distinction between a charity supporting a change of the law if it supports your charitable purpose - which is allowed - and your charitable purpose being a change in the law, which is not."

Amnesty International is looking for compromise. "We already have charitable status in areas like education, research and campaigning on torture and disappearances. But our work on the death penalty is seen as trying to change the law in countries where it is legal," says media director Lesley Warner.

"The Bill talks about the advancement of human rights as a charitable purpose, but we are still waiting for commission guidelines," she says.

"Previously, the commission held to the judgement that you can only campaign in certain countries that have signed particular human rights declarations.

We are hopeful that the new guidelines will now redress that."

Publicity around the Bill has focused on what the requirement of all charities to prove public benefit will mean for private schools and charity hospitals. Voluntary Sector Minister Fiona Mactaggart has indicated that most schools have nothing to worry about, but she warned that big charity hospitals will have to prove that their commercial activity is of public benefit.

Luke FitzHerbert of the Directory of Social Change, who is writing a response on the issue of hospitals and schools, comments: "They've decided to leave the definition of public benefit to case law, but there is virtually none on the charitable status of fee-charging schools and hospitals."

Charity Commission powers

The Bill gives increased regulatory powers to the commission, which some fear it will use to bash smaller charities. According to an Association for Charities report, which is being submitted to the scrutiny committee this month, the present arrangement encourages over-regulation by the commission.

"We believe the 12 case studies in our report show unnecessary, severe and damaging regulation," says chairman John Weth. "We suggest one particular means to monitor future interventions is to oblige the commission to publish the number of interventions and a brief account of each case."

Neil Cleeveley, director of information and policy at umbrella body NACVS, says: "There's a role for someone to police charities, but it should not be the main role of the commission. It should be about getting those things right in the first place, through good practice."

The NCVO wants the commission to have a regulatory focus but, says Pratten, the dual role of combining advice and regulation is problematic. "When it starts to issue advice, trustees could interpret this as statutory guidance, and this can lead to regulatory creep and a blurred boundary between what is law and what is guidance."

Many feel a lot is riding on the role of Geraldine Peacock, the chair-designate of the commission.

Charity Appeal Tribunal

The Bill will create an independent adjudicator on commission decisions that could, in theory, challenge or reject the commission's guidance and rulings.

The tribunal proposal had overwhelming support at consultation. With some 300-400 commission inquiries each year, and the potentially huge costs of auditors and consultants, a lot hangs on its yet-to-be-defined powers.

The NACVS's Cleeveley adds: "The tribunal will hopefully help to influence how the commission works and encourage it to be a little more understanding of small organisations."

One charity campaigner puts it more strongly: "The dice are so heavily loaded against charities, and there is a hope that the tribunal is armed with real teeth that can draw blood when the commission goes on outrageous fishing expeditions."

Trustee liability and remuneration

Personal liability causes a lot of anxiety not only for trustees, but those considering being trustees. "One of the big problems that boards have is recruiting trustees," says the Charitable Trustees Network's Linda Laurance. "It is excellent that there is now greater clarity and reassurance.

In principle, if you have acted honestly and in good faith, you were not likely to find yourself in difficulty, but the Bill now spells this out."

The NCVO welcomes the greater scope to pay trustees where they have provided commercial services, says Pratten. "The principle of voluntarism is what trusteeism is about, but it is useful that the Bill clarifies that if you provide a service that is beyond your role as a trustee, you should be paid."

Trading subsidiaries

The Bill does not include the initial proposals for relaxing restrictions on trading by charities - an omission which has disappointed the Charity Finance Directors' Group and prompted chief executives' body Acevo to challenge it in Parliament. But the private sector will be happy, says charity lawyer Helen Harvie. "Many entrepreneurs will breathe a sigh of relief that there will be no further encroachment on their existing markets from incoming charities."

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