Terrorist abuse of charities is “potentially the most deadly” problem the Charity Commission faces, its chair William Shawcross has said.

In an interview published at the weekend in The Sunday Times, Shawcross said: “The problem of Islamist extremist is not the most widespread problem we face in terms of abuse of charities, but is potentially the most deadly. And it is, alas, growing.”

Shawcross told the paper he has written to the Prime Minister to win support for a change in the law which would automatically disqualify anyone convicted of terrorism or money-laundering offences from setting up charities or becoming trustees.

Shawcross also repeated comments he made last week alongside the Commission’s official response to a critical Public Accounts Committee report, that his organisation’s funding situation was “unsustainable”.

He said the Commission needed more funding and more powers if it was to do its job properly, and that the Commission is considering registration charges and annual fees for charities as a possible way to meet the shortfall.

He said he rejected accusations from Margaret Hodge, chair on the Public Accounts Committee that the Commission was “not fit for purpose”.

“To get kicked by Mrs Hodge and other politicians is just completely wrong,” he said.