Small charities could lose out, and a two-tier system of charities could be created, if the recommendations in Lord Hodgson’s review of the Charities Act are enacted, according to sector leaders.

The Directory of Social Change has warned that the recommendation to raise the annual income threshold at which charities are required to register with the Charity Commission from £5,000 to £25,000 could “decimate” small charities' capacity to raise money and awareness for their causes.

Debra Allcock Tyler (pictured), chief executive of the DSC, said the measure would be “disastrous for small charities and not in the public interest”.

Allcock Tyler said that while Lord Hodgson indicated a relaxing of rules around allowing charities under the threshold to voluntarily register, this would not mitigate the raised official threshold quickly enough. “His proposals suggest this [voluntary registration regime] will only take place after large numbers of excepted charities and the new charitable incorporated organisations are registered. It is hard to see how the Charity Commission will manage this in the near future, given its dire financial situation,” she said.

“We were supposed to get voluntary registration with the 2006 Charities Act – but it still isn’t possible in practice. Instead we may be waiting another five years for it following the review of that very same Act – if we get it at all.”

Pauline Broomhead, chief executive of the Foundation for Social Improvement which works with more than 2,000 small charities, concurs with the DSC view. In a blog for civilsociety.co.uk today, Broomhead says that raising the threshold for registration poses a real threat for small charities which need the Charity Commission tick of approval to reassure and solicit donors.

“Small charities which raise less than £25,000 per annum are no different from larger organisations. The work they do is vital, it is undertaken with the same passion, same determination, and is as relevant as larger organisations,” she writes. “So why should they be treated differently?”

On the flip side, Broomhead warns the proposals to fine charities for late filing and charge fees for registering with the Charity Commission could essentially wipe out a small charity’s earnings.

'Two-tier system of charity trustees'

Broomhead criticises a range of measures proposed in the Hodgson review in her blog today, including the controversial proposal to allow charities with income of more than £1m a year to pay trustees without needing Charity Commission approval.

Broomhead echoes the now oft-repeated criticism that paying trustees undermines the spirit of trusteeship, but adds that not giving small charities the same privilege, nevermind their likely inability to afford to pay trustees, could create a two-tier system of charity trustees.

“Does this mean that their trustees are ‘less professional’ in their governance? Could the trusteeship of a small charity be perceived as less attractive even though their inability to pay trustees means they retain the true spirit of trusteeship? We don’t want a system like that of the private sector in which there are ‘jobs for the boys’ with regards to non-exec directors,” she writes.