Legal

Review of the Charities Act 2006 – is it worth the fuss?

Governance | Rosie Chapman | 18 Nov 2011

Rosie Chapman provides a whistle-stop tour of the terms of reference of the NCVO's review of the Charities Act 2006.

During the Charities Bill’s passage through Parliament, a commitment was made to review the Act five years after the legislation came into force.  

Just inside the wire, the government has announced that Lord Hodgson of Astley Abbotts will be leading this review, which is due to report by summer 2012. 

So will the review be a low key affair to ‘tick’ a box, or will it be the foundation for significant change?

The appointment bodes well, as Lord Hodgson will be coming to this with a lot of knowledge and ideas. A Conservative peer, and former frontbench spokesman for home affairs, he led for Conservatives in the House of Lords on the Charities Bill, so he understands the legislation.  More recently, as well as becoming president of NCVO, Lord Hodgson has chaired the government-appointed Red Tape Task Force and has made a series of well-received recommendations for how to cut red tape for small charities.  
In some ways five years is no time at all for legislation to bed down.  Neither should we forget that one or two aspects of the Act, such as the public charitable collections provisions, are still to be implemented. 

However, in other respects, the world looks a very different place to when the Bill became law on 8 November 2006.    There’s been the systemic failure of the banking sector, and now a Euro crisis deepens the economic gloom.  The MPs expenses scandal and ‘Hackgate’ in the print media have dented public confidence in key institutions, and new forms of civil engagement - and protest - are made possible through social networking sites.  That said, it’s worth remembering that all these changes are occurring at a point when trust in charities remains much higher than in most other institutions. 

To help form its response, NCVO has set up a Charity Law Review Advisory Group, to shadow Lord Hodgson’s review.   The group is not meant to be representative, but is simply a group of ‘critical friends’ with knowledge of charity law and of charities, who can give an independent view, and who can make suggestions for improving the legal and regulatory framework in which charities operate.  Our terms of reference are publicly available, and we’ve recently held our first meeting, at which we agreed to focus on six big themes. 

Here’s a whistle-stop tour of them.

1    How charity trustees operate

Lord Hodgson’s review will look at the effect of the 2006 Act on the willingness of individuals to volunteer.   That’s very wide in scope so we will focus our thinking on what a framework which encourages trusteeship might look like.  We’ll be looking at areas such as:
a)    trustee liability – for example should limited liability be extended to trustees of unincorporated charities?
b)    the much-discussed – and much-disputed – question of whether trustee remuneration should be made easier for charities to ‘adopt’
c)    trustees' independence.  Is this an area under threat?
d)   charities’ transparency and accountability, and their reporting requirements
e)    trustees' regulatory obligations.  Are they about right or could they be made simpler?

2    How the Charity Commission works

Given my closeness to the Commission, I’ll be letting others lead on this area, but areas they’re likely to discuss include:  
a)    the Charity Commission’s funding model, including whether it should charge for some or all of its services
b)    the Charity Commission’s statutory objectives, functions and powers.  For example is it still realistic for the regulator to have an objective to increase public trust and confidence in charities?  Could more be done to relax the regulation of sales of land and of permanent endowment?
c)    cross-border regulation and the Commission’s relationship with the Scottish and Northern Ireland regulators, as well as with other regulators such as Companies House and HM Revenue and Customs.

3    Public benefit

The recent Tribunal decision on the judicial review of public benefit brought by the Independent Schools Council clarified the law to some extent.  However, its practical application is not as clear as many had been hoping for because, perhaps not surprisingly, the judgment expressly avoids being prescriptive about what the trustees of independent schools need to do.  There is also the November Tribunal hearing on benevolent charities to consider. 

As a starting point, NCVO’s advisory group will assess the current state of the law on this subject, before making recommendations about what Parliament could, or should, do, in relation to public benefit, or suggest whether the Commission could play a different role.

4    Means of redress

During the debate on the Charities Bill, the creation of a Charity Tribunal was seen as a ‘light-touch’ and inexpensive way for Charity Commission decisions to be challenged.  However, the reality has proved somewhat different and costly for charities and other appellants, as well as for the Commission.  The advisory group will look at the Tribunal’s role, remit and purpose. 

We will also take the opportunity to look at alternative means of redress, such as the e-petition campaign for a Charities Ombudsman'’ to deal with complaints about charity services, as well as more informal routes such as the role of arbitration and mediation.

5    Fundraising

Various other sector organisations (such as the Institute of Fundraising, the Fundraising Standards Board, the PFRA and the Charity Retail Association) will be looking at the fundraising aspects of the Charities Act, including the role of self-regulation. 

The advisory group will focus instead on the link between charity fundraising and its impact on public trust and confidence in charities, for example by looking at the balance between public expectations about minimum safeguards for fundraising, as balanced against minimising the regulatory cost for charities’ fundraising.

6    Charities and political activities

A recent Public Administration Select Committee evidence session focused on charities' campaigning activities, and questioned whether some charities, including think tanks, were straying from legitimate campaigning activities into political lobbying.  One MP has suggested that it “might be better if Parliament set the guidelines so everybody sees it as fair”.  This is an obvious focus area for the advisory group, given the implications for charities’ independence and for public trust and confidence. 

Conclusion

It’s an ambitious list. 

To help with the task, we’ll be working with others such as the Charity Law Association and a number of other umbrella groups who have said that they would like to feed in their views to NCVO’s advisory group.

Lord Hodgson is charged with completing his review by summer 2012, so expect to see lots of activity on this front between now and then.  

Rosie Chapman is an independent charity adviser and co-founder of Belinda Pratten and Rosie Chapman Associates

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