Lord Hodgson stands by the recommendation in his Charities Act review that charities with income of less than £25,000 should have to attach the prefix ‘small’ wherever their charity number appears, despite opposition from the sector.

Lord Hodgson wrote to the Public Administration Select Committee last month to emphasise his top three reforms from his 158-page review that was published in July.  The Committee is currently conducting its own inquiry into the Charities Act 2006 and charity regulation.

The three reforms most favoured by Lord Hodgson relate to registration thresholds, trustee duties in relation to investments, and boosting the social investment market.

Thresholds

On thresholds, he said the current situation is unsatisfactory because on one hand small charities with income below £5,000 cannot register and so have limited growth prospects, while on the other hand several small charities don’t want or need to register because, for example, they are simply grantmaking organisations.

To address this, the income threshold for compulsory registration should be raised from £5,000 to £25,000 unless the charity claims gift aid (in which case registration would be required at any size).  But any charity, no matter what its income, must be allowed to register if it wants to.

Along with these changes should come a requirement for charities with income of less than £25,000 to have the prefix ‘small’ attached to their charity number. “Not as a value judgement,” wrote Lord Hodgson, “but as a statement of fact to inform the public.”

The 'small charity' prefix idea has already drawn opposition from umbrella bodies that represent small charities.

Hodgson also reiterated his recommendation that all unregistered charities must be made to say so on their letterheads, cheques and marketing materials.  “Again, not as a value judgement but so the public is aware that there will be no information available on the Charity Commission website.”

These changes should be delivered as a package, over a period of years, Hodgson suggested. The result would be “more charities empowered, more charities free not to register and, most importantly, the public have signposts as to ‘small’ and ‘unregistered’.”

Investment duties of trustees

His second ‘top tip’ was for a “statutory clarification of charity trustee investment duties” which would state that a charity’s investment powers are subordinate to its charitable objects, and different to the investment duties of trustees of pension funds and private trusts.

The current system, he said, “can act as a significant barrier to innovative and creative investment approaches on the part of charity trustees”.

Creating a class of ‘social investor’

Lord Hodgson’s final most-favoured reform is aimed at helping the social investment market to grow – even though social investment was not even mentioned in the Charities Act 2006.

He told the Committee in his submission that he had tabled amendments to the Financial Services Bill currently making its way through Parliament, to include social investment on the face of the Bill.  He supports the creation of a new class of ‘social investor’ to help grow the market.

The Public Administration Select Committee has extended the deadline for written submissions to its inquiry, until noon tomorrow.