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Charities Act gets vote of approval from charity law experts

Baroness Howe of Idlicote, chair of the NCVO Charity Law Review Advisory Group
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Charities Act gets vote of approval from charity law experts

Governance | Tania Mason | 16 May 2012

The Charities Act 2006 has, overall, proved to be a good piece of legislation that is fit for purpose, the NCVO Charity Law Review Advisory Group has concluded.

Even subjects that have sparked heated debate, such as payment of trustees or the status of the Charity Commission, are, upon closer inspection, "dealt with by the law in a satisfactory manner”, the Group said in their submission to Lord Hodgson’s official review of the Act.

“Rather it is other factors, such as the economic downturn, the recent budget announcements and the public service contracting environment, that are of far greater concern,” they concluded.

However, the group did make some recommendations to improve the legal and regulatory framework for charities. These included:

  • The government, the devolved administrations, the sector’s three regulators and HMRC should try to agree a “single definition of charity and a single public benefit requirement for the whole of the UK, which would also apply for tax purposes”.
  • Further legislation is “highly desirable” to clarify the law on public benefit, “but this should not be an attempt to produce a comprehensive definition of the public benefit requirement”.
  • There should be a full consultation on the possible creation of a charities Ombudsman and the details of how it should operate.
  • The Charity Commission should publish statistics about the number of individual trustees who have been required to make payments to their charity because they breached their trustee duties. This should help to reassure prospective trustees about the level of risk involved in the role.
  • Funders with an interest in governance should undertake further research into whether paying trustees helps with recruitment, diversity and improved governance.
  • The Charity Commission, HMRC and Companies House should co-ordinate the type of information they ask for, and end the current duplication of reporting requirements. “In particular, all regulators should take steps to adopt the same type of software in order to enable the standardisation of data collected”. This should be fit fir purpose for all types of charity, and affordable.
  • Self-regulation of fundraising is working, but stronger sanctions are desirable. A full consultation should be carried out to explore various options and their implications; a model similar to the Advertising Standards Authority should be considered in particular. But financial penalties should only be introduced as a last resort, because of the detriment caused to the charity and the fact it is donors’ money at stake.
  • The inherent unfairness of the current public collections regime needs to be addressed so that charities are not disadvantaged compared with commercial collectors. 
  • The Charity Commission’s core public benefit guidance should be much simpler and shorter.
  • Public benefit reporting should be extended to all exempt and excepted charities to improve accountability.

Charity Commission funding and independence

Regarding the funding of the Charity Commission, the group decided no other funding model is more appropriate than the one currently in place.

It said it hoped that the current tight budget would be reviewed as soon as economic conditions allowed, but that in the meantime it is “not appropriate or advisable for the Commission to implement money-raising strategies such as one-off charges or the introduction of penalties”.

The group also specifically considered the Charity Commission’s independence from government, acknowledging that certain media have portrayed its current chair, Dame Suzi Leather, as having close links to the Labour government that appointed her to the role.

But it concluded that “such portrayals are inherent in any high-profile appointment, where the incumbent’s political leanings or previous activities may be juxtaposed with the responsibilities of the current job”, and added there is no hard evidence that the Commission does not operate independently from government.

The advisory group is chaired by Baroness Howe of Idlicote (pictured). The other members are:

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