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

    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

    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

    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

    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

    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

    “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

    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
    •  The advancement of environmental protection or
    •  The relief of those in need, by reason of youth, age,
      ill-health, disability, financial hardship or other
    •  The advancement of animal welfare.

    The draft Charities Bill is now out for scrutiny. It is
    available at

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