Simon Steeden of Bates Wells Braithwaite says the Charity Commission must produce clearer guidance on charities and the referendum.
The campaign tanks are parked out on the lawns.
In 1972 Ted Heath’s government passed the European Communities Act committing the United Kingdom to membership of the European Economic Community. The British public supported that decision by referendum in 1975. More than 40 years on, Britain will soon return to polls once more to determine afresh the European question.
As the dust settles on the party conference season, the stage is set, with those on opposing sides facing up and preparing for battle.
Last week’s launch of Britain Stronger In Europe, likely to be designated as the official “In” campaign, followed fast on the heels of two contenders for the official “Out” campaign, Vote Leave and Leave.EU. Although the date of the referendum is still in doubt, many organisations with an interest in the result will be beginning to think about whether to take an active role in the campaigns to remain in, or leave, the EU.
Charities, which are subject to strict rules on political activity, will be considering not only how the prospect of leaving the EU might affect them but also whether any such affect would justify their involvement in campaigning one way or the other.
Unhelpfully, the relevant Charity Commission guidance in this area is not as clear or detailed as comparable guidance issued by the Office of the Scottish Charity Regulator (OSCR) in advance of last year’s referendum on Scottish independence. There are inconsistencies between the two sets of guidance which urgently require resolution. It is imperative that the Charity Commission and OSCR issue joint guidance in relation to the EU referendum, giving trustees the clarity they need to plan their activities and ensure that English, Welsh and Scottish charities can engage with the referendum on a level playing field.
Even then, charities will need to be conscious of the restrictions on the spending by campaigners in the run up to a referendum contained in the Political Parties, Elections and Referendum Act 2000 (PPERA). These rules are similar to those applying to election campaigning following the controversial “Lobbying Act” (the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014), but have some important differences.
Can charities campaign on the EU Referendum?
Charity trustees will be familiar with the general rules applying to campaigning by charities, contained in Charity Commission guidance note CC9. Charities must be established only for charitable purposes. Political purposes are not charitable but charities are able to campaign as a means of advancing their charitable purposes, even if this includes political activity seeking changes to law or policy. Even then, there are limits to the political activity that a charity can pursue: charities should not be party political, should not pursue political activity as their sole and continuing activity and should actively seek to stress and protect their political independence.
Rob Wilson, the Minister for Civil Society, this week endorsed the view that “it is important that charities can campaign to support their charitable purpose” and many categories of charitable purposes might reasonably be affected by the outcome of the referendum. Universities UK has argued that for UK universities and students “a UK withdrawal from full EU membership would have far-reaching and adverse consequences, in terms of loss of influence and potentially loss of funding.” Some charities seeking to advance commerce might take the view that EU ‘red tape’ impedes UK commerce. Other charities which might take a view one way or the other include those existing to advance environmental protection, human rights, health, the arts, culture, heritage or science.
Unfortunately, the Charity Commission guidance on referendums (Charities, Elections and Referendums) is not sufficiently clear about the scope for charitable involvement in referendum campaigning. Although the guidance recognises that “there may be some circumstances in which it is appropriate for a charity to set out the pros and cons of a yes or no vote for their beneficiaries” if the outcome of the referendum will have a particular impact for those beneficiaries, it states that “this is distinct from the charity actively campaigning for a ‘yes’ or ‘no’ vote.”
The Commission suggests that in “exceptional cases” charities may consider that the outcome of a referendum is likely to directly affect, positively or negatively, the delivery of their charitable objects, implying that it could be appropriate for charities to campaign directly for a yes or no vote in such circumstances. However, the Commission suggests that charities should consider carefully whether there is a “significant party political dimension” to the referendum or whether “the aims of the charity are narrower than the potential impact of the referendum”, such that “there is a risk of the charity being engaged in party political or inappropriate political activity.”
Worryingly, this guidance seems likely to discourage charities from participating in the EU referendum campaign even where the result is reasonably expected by the trustees to have substantial far-reaching consequences for achievement of the charity’s purposes. Many trustees will be concerned by the suggestions that campaigning for a particular outcome will only be permissible in “exceptional” cases and that campaigning should be avoided where there is “a significant party political dimension” to the referendum, particularly where the raison d’etre of one of the UK’s major political parties is to achieve withdrawal from the EU.
The suggestion that charities should not campaign for an outcome in relation to a referendum where the charity’s aims are narrower than the potential impact of the referendum is also highly questionable. Charities will often be involved in policy debates which have wider reaching consequences than those which they are appropriately interested. This does not mean that they should avoid such debates. The test for charity trustees should be whether the outcome can reasonably be expected to have a positive or negative impact on achievement of their charitable purposes, whilst taking account of risks associated with any campaigning.
The Scottish experience
OSCR has already explored these issues in preparation for last year’s ‘indyref’. When it first considered the issue in early 2013, OSCR produced guidance suggesting that charities would not be able to support a yes or no outcome in the independence referendum. As the outcome of the referendum would have much wider consequences than the remit of any particular charity, it suggested that “it seems unlikely to OSCR that supporting or opposing the prospect of Scottish Independence as a whole can be easily linked to the furtherance of charitable purposes.” Following criticism, however, OSCR soon reversed its position and issued revised guidance recognising that the significance and potential impact of independence (or continuing within the UK) on the work of charities made it of obvious concern to the sector.
The revised OSCR guidance endorsed the ability of charities to campaign for a yes or no vote, provided the trustees were able to demonstrate that this would advance the charity’s purposes, not be prohibited by the charity’s governing document, not be advancing a political party and be in the charity’s interest, acting with due care and diligence. Where a particular outcome in the independence referendum was supported by virtue of a clear link to the interests and purposes of the charity, OSCR helpfully made clear that this would not in itself be advancing a political party – a reasonable approach in the context of a referendum campaign which begs a binary response to a major constitutional policy choice, with political parties often falling on different sides of the divide.
Charities in England and Wales need the same assurance in relation to the EU referendum, where the support of particular parties for or against leaving the EU is no different than the division between the SNP and other major Scottish parties in relation to the Scottish referendum. Indeed, it may well be less clear that the EU referendum is split along party lines, with the Conservative and Labour parties both internally divided on the issue to varying degrees.
This is not to suggest that charities should take their obligations to maintain political independence lightly when engaging with the EU referendum campaign. Compliance with the OSCR guidance would still require the charity’s trustees to come to a reasonable view, based on appropriate considerations (such as empirical evidence or expert advice), that the referendum is likely to directly affect advancement of their charitable purposes. Consideration will need to be given to the effect on beneficiaries, supporters, donors and members, and whether any campaign would put the charity, its assets or reputation at undue risk.
But with the “In” and “Out” campaigns out of the starting blocks, it is essential that charities are given clarity on their ability to engage with the EU referendum as soon as possible. It is also highly desirable that the apparent disparities between relevant Charity Commission and OSCR guidance are resolved, to ensure that charities on both sides of the border can engage with the referendum on a level playing field. This will be of particular concern to those charities jointly registered with both the Charity Commission and OSCR, which will otherwise be left to grapple with conflicting regulatory guidance in planning their approach to a referendum which could have consequences across the generations.
In the view of Bates Wells Braithwaite, the OSCR guidance, having been stress-tested at the sharp end of a recent and hard-fought referendum campaign, should form the basis of joint Charity Commission and OSCR guidance as an accurate reflection of the ability of charities across Britain to engage with the EU referendum.
Election and referendum law
As if the charity law complexities are not enough, charities will also need to be mindful of the rules that may also apply to them under election and referendum law. The rules applying to non-party election campaigning under PPERA were subject to extensive attention in the charity sector during their amendment by the “Lobbying Act”, and are currently being independently reviewed by Lord Hodgson.
To date, much less attention has been afforded to the rules already applying to referendum campaigning under Part 7 of PPERA. Under those rules, it is unlawful for a person to spend £10,000 during a regulated period on expenditure “with a view to promoting or procuring a particular outcome” in the referendum, unless they are registered with the Electoral Commission as a permitted participant. Once registered, the permitted participant will be required to comply with transparency requirements in relation to expenditure and donations, similar to those that apply to non-parties registered with the Electoral Commission in advance of an election.
However, there are some important differences between the rules applying to referendum campaigning and those applying to election campaigning under the same Act. In particular, the test for referendum expenditure is of what the campaigner actually intends to achieve through its campaign. Regulated expenditure will only be incurred if it is intended to promote or procure a particular outcome in the referendum. Helpfully, this takes away much of the guess work implied by the test for regulated election expenditure, which catches any expenditure “reasonably regarded as intended to promote or procure electoral success”.
Even where charities do decide that that the result of the referendum is of direct relevant to their ability to advance their charitable purposes, and so campaign intentionally for an in or out vote, they will only satisfy the test for regulated referendum expenditure if their spending falls within a list of qualifying expenses under PPERA, which includes expenditure on advertising, unsolicited material addressed to electors, market research and canvassing, events and rallies, services and facilities connected with media dealings and transport connected with obtaining publicity. Importantly, staff costs of organisations are excluded, in contrast to the position for election campaigning, which may make it less likely that organisations will exceed the threshold for registration with the Electoral Commission (despite the threshold being lower than that applying to election campaigning).
In due course, any charities intending to campaign for or against continued EU membership will need to ensure that comply with these rules. The regulated period for these purposes can begin no more than six months before the referendum. Although the government has until the end of 2017 to hold the referendum, it has indicated that its preference is to hold it next year. The European Union Referendum Bill is currently making its way through Parliament and might ultimately provide more clarity in this area. One way or another, charities intending to join the battle will soon need to ensure their houses are in order.
Simon Steeden is a partner in the charity and social enterprise department at Bates Wells Braithwaite.
