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Transforming a 400-year-old decrepit beast into something modern and beautiful is no small task. But with the draft Charities Bill, launched last week, the government has attempted to do that to the law in England and Wales which governs the voluntary sector.

The much-needed makeover includes a change in law that means charities must show that they provide a public benefit, extra functions for regulator the Charity Commission and measures designed to attract high-calibre trustees. It has been universally welcomed.

Launching the bill for consultation, Home Office minister with voluntary sector responsibility Fiona Mactaggart emphasised the importance of promoting public confidence in charities - the bill itself is littered with references to the issue. High-profile scandals involving charities, although few in number, can have disastrous consequences for a sector so dependent on donations.

But it is not just the confidence of the public that matters. So too does that of local authorities. The state provides an increasing amount of the voluntary sector's money and the government's drive to involve charities more in delivering public services means money from that source will increase. The bill's explicit aim may not be to strengthen the relationship between councils and the sector but it might serve as a secondary purpose.

Clarity over the role of the sector, and greater transparency and accountability, can only be a good thing for those councils doubtful about voluntary organisations' ability to deliver public services.

David Chater, public affairs manager at social care charity Turning Point, says: "The bill could have an impact indirectly. One of the biggest things it could do is build faith in the sector. It could improve its image because we could see a move away from equating charity with amateurishness. If we could get away from that it would be a really big step."

Head of policy at the Association of Chief Executives of Voluntary Organisations Nick Aldridge says: "Delivering public services is not the main point of the bill but I think the public benefit test will help."

He has spoken to several councillors who believe charities are unaccountable to the public because their members are not democratically elected. "On that basis they are often unwilling to engage with charities. Publicly stressing the public benefit message might give councillors more confidence about entering into partnership with the sector," he adds.

Nevertheless, the concept of a public benefit test, described by Mactaggart as the "bedrock" of charitable status, is not without its problems. A specific definition of what constitutes public benefit is absent from the bill because it would be very difficult to devise one that would cover all activities (see box). Aldridge points out public benefit will be hard to measure.

Nonetheless, the Charity Commission will be charged with assessing whether an organisation meets this criterion. It will have nine commissioners instead of five with a separate chair and chief executive. Importantly, says Aldridge, its role as a regulator will be stronger. A move away from box-ticking inspection would be very welcome, he adds.

Crucially, an independent appeals tribunal will be established to allow charities to dispute decisions made by the Charity Commission, removing the expense and anxiety attached to a challenge in the High Court, which is currently the only option.

Chief charity commissioner John Stoker said the proposals in the bill provide "practical benefits for virtually every charity", and contain a welcome definition of the commission's future role and responsibilities.

"It's a well balanced package of changes that help to clarify what's charitable while keeping the common law flexibility which allows this diverse sector to develop. From our perspective, this is a win-win result which will keep the charity brand at the heart of our society."


Even big charities like Turning Point, which has an annual turnover of £50m, still feel they are seen as a cheap option by councils and other statutory providers, says Chater.

Whether fairly or not - and some would say the governance arrangements in councils are sometimes left wanting - the prevailing view is that the voluntary sector is unorganised.

"The perception of the sector lags behind the reality," says Chater, pointing to the success of the Royal National Institute for Deaf People in providing hearing aids for the NHS.

Unfortunately, issues of governance are largely missing from the bill, despite the fact that it was raised in the consultation document Private Action, Public Benefit, published in 2002 by the prime minister's strategy unit.

Included in the bill are measures to develop the role of trustees in the hope of attracting recruits of a higher calibre such as allowing payment for services they carry out for the charity outside of the trustee role. There is also relief from liability for breach of trust, whereby trustees who have made an honest mistake can seek help from the commission without fear of being penalised.

Aldridge says: "Liability can scare trustees off. For example, you may have a health professional who is on a mental health charity's board that may never have taken a role with that type of responsibility before. It is reassuring for them to know they can go to the commission if they have made an honest mistake."

However, no mention is made of how to recruit suitable people. Research carried out by the Association of Chief Executives of Voluntary Organisations last year found that half of the trustee boards had no IT or human resources skills. Word-of-mouth recruitment of trustees is common in small and medium-sized charities but, as Aldridge points out, people should not be appointed because they get on with other trustees on the board but because they have skills they can contribute to the charity.

Confidence in the sector may be boosted by the knowledge that charities are being steered by trustees fit for the job. 

Public benefit

The bill does not define public benefit but these are the purposes under which charities may be judged to provide such a benefit.

•  The prevention or relief of poverty.
•  The advancement of education.
•  The advancement of religion.
•  The advancement of health.
•  The advancement of citizenship or community development.
•  The advancement of the arts, heritage or science.
•  The advancement of amateur sport.
•  The advancement of human rights, conflict resolution or reconciliation.
•  The advancement of environmental protection or improvement.
•  The relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage.
•  The advancement of animal welfare.

The draft Charities Bill is now out for scrutiny. It is available at www.homeoffice.gov.uk/comrace/active/charitylaw/index.html