MPs questioned whether the Charity Commission is fit for purpose at a Public Accounts Committee (PAC) meeting yesterday, advising they know of 50 charities like the Cup Trust.

William Shawcross, chairman and Sam Younger, chief executive of the Commission appeared before the PAC to answer questions on the Commission’s investigation into the Cup Trust.

Margaret Hodge, chairman of the committee, questioned why the Commission only had 20 compliance visits last year and why it appeared to not use its regulatory powers. The National Audit Office has agreed to investigate, she said: “We do have questions about whether you’re fit for purpose particularly as a regulator and the comptroller and auditor general has very kindly agreed to do a study, off the back of which we will do a hearing much more widely.”

Concluding proceedings she said: “We’re pretty appalled I think as to whether or not you have the right regulatory regime to give the public confidence that charitable trusts are being properly regulated by you.”

The PAC had identified 50 charities operating in a similar way to the Cup Trust, she said: “We think we know of 50 organisations where charities are being used as tax avoidance mechanisms – and that’s us completely on the outside.”

Shawcross replied: “I have no reason to believe that there are 50 such charities,” and promised to investigate any that they do find.

Amyas Morse, comptroller and auditor general of the National Audit Committee, also attended the meeting and said: “As I looked into the detail of the Cup Trust what surprised me was it was possible for the legal advice to say that there wasn’t anything you could do, I mean some of the elements in it are really quite surprising.”

'Systemic failure' to regulate

Younger and Shawcross were forced to admit that they had not read the 2001 report by National Audit Office, Giving confidently: the role of the Charity Commission in regulating charities. 

Richard Bacon, Conservative MP for South Norfolk pointed out that the 2001 report had referred to the same issue being brought up in a 1998 PAC report and said: “This is a scratched record Mr Shawcross, it’s been going on for a very long time.”

Stephen Barclay, Conservative MP for North East Cambridgeshire accused the Commission of ignoring previous recommendations from the Committee and asked: “How do we ensure that this time something might be different?”

Sam Younger denied that his predecessors would have ignored the previous recommendations: “Through the early 2000s there was a significant increase in the amount of investigation.”

Barclay disagreed and said: “From 1998 there is a continual trend down” in investigations by the Charity Commission.

Younger said that the Commission used its powers where appropriate and said: “But I don’t think the use of those powers is in itself necessarily an adequate measure of the enforcement.”

Shawcross added: “This hearing should not give the impression that the charitable sector is full of rogues and monsters whom we fail to control. It is not like that.”

Barclay said: “But there is also an underbelly of fraudulent charities and what there seems to be is a systemic failure to which the Cup Trust is the most symbolic, but the point that comes out of this hearing is that this is not an isolated case.”

“Your enforcement now for 15 years has repeatedly ignored the warning of the National Audit Office, of this committee.”

Shawcross pledged to “cooperate fully” and said the Commission would “not ever ignore any recommendations from any Parliamentary Committee”.

Commission will be more open in the future

William Shawcross outlined the Commission’s investigation in to the Cup Trust, which was started in 2010 and concluded in 2012.

He said, “We didn’t like it, we thought it was horrible – we would have liked to have closed it down.”

He said the Commission should have made a public statement in 2012 once it had completed its investigation. “That was a mistake – we should have done that. For any other cases like this that come to our attention we will I think in the future be more public with our concerns.”

Younger explained: “When we did the investigation we looked in very great detail at whether this was a charity that came under our jurisdiction, whether we had been right at registration – because we could have taken it off the register were it not. We then asked was this a charity with exclusively charitable purposes and the legal advice we had both internally and very clearly externally was that his remained a charity.”

He told the MPs that the Commission did not have “sufficient evidence” to challenge trustees on putting charitable funds at risk or in terms of private interest.

"We stopped our investigation at that point pending any decision about gift aid."

Hodge had seen a summary of correspondence between the Commission and the Cup Trust and said that she saw “very little interrogation or anything that would suggest to me that you have done a thorough investigation. If you have we want to see it because we don’t believe you".

Shawcross said that the Commission will shortly publish a report but stopped short of promising to make all correspondence public.

 

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