Charities with annual income of more than £1m should be able to pay their trustees without seeking permission from the Charity Commission, Lord Hodgson has recommended in his official review of the Charities Act 2006.

The 159-page review, titled  Trusted and independent: Giving charity back to charities, contains dozens of recommendations aimed at shoring up public trust and confidence in the voluntary sector and improving the regulatory environment in which it operates.

On the vexed issue of trustee remuneration, Hodgson said the best solution is to maintain the status quo whereby charities can pay their trustees with permission from the Charity Commission, but that large charities, with income of over £1m, should not need permission provided they disclose payments in their annual reports.

If adopted, this measure would mean that more than 6,200 charities would gain automatic powers to allow them to pay their trustees.

The recommendation drew predictable responses from the sector’s umbrella bodies.  Acevo’s Sir Stephen Bubb said it was “hugely welcome that Hodgson has recognised the fact that some charities want to pay their trustees and we agree with him that they should be allowed to”. NCVO’s Sir Stuart Etherington said it would “set a dangerous precedent and is a deregulatory step too far”.  

Peter Lewis, CEO of the Institute of Fundraising, added that the recommendation seemed totally inconsistent with the tone of the rest of Hodgson’s report, which emphasised the importance of the sector’s voluntary ethos.

The report also recommended that trustee tenure should be limited to three terms of three years.

Hodgson: 2006 Act a missed opportunity

In general, Lord Hodgson said the 2006 Act has been well received and has had a positive impact on the sector.  In many ways, however, it was been “an opportunity missed” – it “could have gone further in deregulating and freeing up charities”.

Among his other more controversial recommendations were:

• Raising the income threshold for compulsory registration with the Charity Commission from £5,000 to £25,000, though those with less than £25,000 income should be able to register if they wish
• The requirement to submit accounts and reporting information should also be set at £25,000
• The abolition of National Exemption Orders, which currently allow charities that carry out high volumes of house-to-house cash collections to do so without needing to apply for separate licences each time
• The Charity Commission should look at charging charities to file their annual returns and to register new charities
• Local authorities should not be allowed to ban chugging
• A sector-funded, public-facing, central self-regulatory body covering all aspects of fundraising should be set up. The Cabinet Office should chair a standing committee to drive this forward.
• FRSB membership should not yet become compulsory but government should review its progress again in five years to determine whether it has made the necessary step-change in coverage and public awareness.
• Requiring all unregistered charities to put the word ‘unregistered’ on all their fundraising materials, letterhead and cheques
• Giving serious consideration to the introduction of fines for charities that fail to comply with reporting requirements and withdrawal of gift aid for those that file late
• Charities with less than £25,000 income should be required to put the word ‘small’ before their charity number wherever it appears
• Raising the audit threshold from £500,000 income per year to £1m and removing the ‘asset test’ that currently requires organisations with assets worth £3.26m to undergo an audit
• Abolishing the Standard Information Return
• Changing the name of the Charity Commission to ‘Charity Authority’
• Enabling the Charity Commission to delegate some of all of its functions to another organisation to exercise on its behalf
• The Office for Civil Society and the Charity Commission should investigate shifting regulation of social housing providers to the Homes and Communities Agency.
• The Charity Tribunal should have to include a short, plain-English summary at the start of all its judgments to help lay people understand the main points
• The time limit for bringing a case to the Charity Tribunal should be extended from 42 days to four months
• A charities ombudsman is not recommended but the sector should look at the feasibility of setting up its own complaints scheme
• The government should devise a standard social investment vehicle and should amend the Financial Services Bill to provide a statutory and regulatory underpinning to social investment
• A debate needs to be had among and between Parliament, the sector and the public, to pin down what constitutes a charity in today’s world

Click on the linked sentences above to see more detail on those proposals.