Charitable gains

Charities are big business in the UK. There are 188,000 registered
charities in England and Wales, in a voluntary sector of around
600,000 organisations. In a sector of this size, the public can
sometimes feel they spend their lives dodging tin rattlers in the
high street, and having their heartstrings tugged by begging
letters.

Last month, the Cabinet Office strategy unit issued a consultation
document that reviews and proposes reforms to the laws governing
charitable status for the first time in 401 years. The sector and
interested parties have until 31 December 2002 to respond.

In order to be awarded charitable status by the sector’s regulator,
the Charity Commission, an organisation must aim to benefit the
public. The law on status is based on the Charitable Uses Act 1601,
known as the Statute of Elizabeth I. It was intended to give
examples of what a charitable activity was at the time and the
courts have developed these over the years. In 1891, Lord
Macnaghten identified charitable purposes as the relief of poverty,
the advancement of education, the advancement of religion and other
purposes beneficial to the community. This set a precedent that is
still adhered to today.

It all sounds perfectly reasonable, so why has the government
decided to review charitable law after all this time? What changes
are the strategy unit proposing, what is the sector’s response to
them and what happens next?

The long-awaited Private Action, Public
Benefit¹ consultation document is a direct response
to growing concern from the public and charities themselves that
the laws governing their work are not adequate. Originally due out
last spring, the document describes the law on charitable status as
“outdated and unclear”.

Neil Jones, director of communications at national advisory body
the Charities Aid Foundation, sums up the sector’s mood about the
law: “The case for changing the law has become unarguable.”

Among many recommendations in Private Action, Public
Benefit, four key proposals stand out. The first is for a new
definition of a charity to be an organisation that not only
provides a public benefit but also has one or more of these 10
purposes: the prevention and relief of poverty; the advancement of
education; the advancement of religion; the advancement of health;
social and community advancement; the advancement of culture, arts
and heritage; the advancement of amateur sport; the promotion of
human rights, conflict resolution and reconciliation; the
advancement of environmental protection and improvement; and other
purposes beneficial to the community.

Leading on from this is the second proposal that in future all
charities “will have to demonstrate public benefit”. The document
says this is necessary because at present “some [charitable]
purposes are presumed to be for the public benefit”.

Terrence Higgins Trust director of finance Andy Munro agrees his
organisation should have to show its public worth: “It is a modest
price to pay for the benefits we enjoy.” He adds that doing this
will improve the public’s confidence in the HIV charity’s work and
losing this confidence would cost more in the long run.

However, just how an organisation “demonstrates” its “public worth”
and who defines public worth will have to be debated by the sector,
according to National Council for Voluntary Organisations head of
policy Ann Blackmore.

So will this recommendation make it more difficult for charities
dealing with controversial clients, such as drug abusers or people
with HIV, to show their public benefit? Will they be considered
unworthy if the public do not support their work
wholeheartedly?

Jones says it is vital that the concept of public benefit is not
confused with what is popular with the public. “What is of benefit
to the public is not always what they would choose to support
financially,” he says. “They might be more interested in supporting
animal causes rather than Aids charities.” Organisations supporting
“unpopular clients” should not be “remotely threatened” by the
requirement, he says.

Eric Appleby, chief executive of national advice agency Alcohol
Concern, says he understands that some people blame alcoholics for
their addiction, but the organisation is not concerned about having
to demonstrate its public benefit.

“There are good reasons to work with people with alcohol problems
because it does an enormous amount of harm to society and to the
individuals themselves,” he says.

Munro is equally confident about the work of the Terrence Higgins
Trust. He says that if this proposal does become law the charity’s
work will fit into at least five of the 10 new charitable
purposes.

The document’s third major set of proposals centre on making the
voluntary sector more accountable and transparent. It says: “In
general, charities and other not-for-profit organisations are not
producing information which is sufficiently accessible and relevant
to the public’s needs.” The strategy unit says the sector has not
focused enough energy on measuring and improving performance and
calls for more use of benchmarking and social auditing tools.

Stephen Bubb, chief executive of the Association of Chief
Executives of Voluntary Organisations, backs the proposal to
increase accountability. “The public places a lot of trust in
charities, and with this trust comes accountability,” he says.
“Organisations should be open and transparent with their
stakeholders.” He adds that using social auditing to measure
effectiveness can be a good way for a charity to prove its
value.

The document suggests charities with an annual income of £1m
or more submit a standard information return to the Charity
Commission. The return would focus on the charity’s impact, how it
measured its performance in achieving its aims and how it planned
to improve. The commission would then publish a user-friendly
version of the return on the web.

Alcohol Concern supports this push for greater accountability and
Appleby is urging the voluntary sector to work harder to develop
ways to prove success to a sceptical public. “What we do needs to
be meaningful and measurable.”

Jones says increased accountability is a natural long-term
consequence for the sector that can only improve its standing in
the public’s eyes. He says: “Charities publishing information will
give the public the chance to exercise their choice over who they
support.”

Reforming the role of the Charity Commission is the strategy unit’s
final major proposal. The document says the commission should
become a statutory corporation called the Charity Regulation
Authority. Its board should appoint four new commissioners and it
should be given a new accountability framework based on five
objectives. These include increasing public trust in charities,
ensuring compliance with charity law and encouraging charities to
maximise their social and economic potential.

Blackmore says organisations find the commission’s dual role of
regulator and adviser “ambiguous and confusing”, adding: “There are
potential problems if an organisation goes to the commission for
advice and then discovers itself to be subject to a regularity
inspection because of that.”

She suggests that the commission’s advisory role should be passed
to an existing voluntary sector body.

The Charity Commission is not entirely convinced about the merits
of changing its role. In particular, a spokesperson says the agency
has “some reservations” about becoming a corporate body. “The
recommendation does not clarify whether the Charity Regulation
Authority would remain a civil service department.”

Although the spokesperson refuses to elaborate on what the
commission would want to evolve into, he says it is “considering
seriously” the document’s recommendations. It plans to respond
formally in November.

No matter how welcome and innovative the strategy unit’s
suggestions, nothing will change unless the government commits to
new legislation. The NCVO is lobbying for a Charity Bill to be
included in the Queen’s Speech in November 2003. Blackmore says:
“There is little point in the government producing this document
and then doing nothing about it. What we don’t want is to be left
in limbo.” CC

¹
Cabinet Office, Private Action, Public
Benefit from
www.strategy-unit.gov.uk/2002/charity/report