Draft bill aims to boost confidence with ‘public benefit’ test

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