Introduction

In July 2012 Lord (Robin) Hodgson published the conclusions of his five-year review of the operation of the Charities Act 2006 (now consolidated into the Charities Act 2011). His report, Trusted and independent: giving charity back to charities, included over 100 recommendations to “give greater freedom to charities and their trustees, encourage the development of social investment and lead to a greater degree of public participation”. (All the background papers of the Revue are available here).  In December 2012 Nick Hurd, Minister for Civil Society, published an initial response to Hogdson’s recommendations while, in the meantime, the House of Commons Select Committee on Public Administration (PASC) conducted its own review of the Hodgson proposals and reported in June 2013. (Volume II of the PASC Report, Additional Written Evidence, is a valuable resource for the views of charities on reform.)

Last week the Government published its Response both to the Hodgson Review and to the PASC Report. As noted in last Sunday’s round-up, the most important points in the response are that the Government believes that the Charity Commission should have a greater focus on its core responsibilities and that the definition of public benefit is best left to case law rather than attempting to encapsulate it in statute. The Government also disputes the assertion (both by Hodgson and the charity sector generally) that the Commission is now underfunded.

The activities of religious groups are intimately bound up with charity law, and what follows is an attempt to pick out those recommendations of the two reports – and the Government’s response – most likely to be of interest to religious charities. Specifically in relation to religion, the Government accepts that there has been a lack of certainty in relation to religious charities and public benefit following the Charities Act 2006 but, unsurprisingly, neither PASC nor the Government mentions the case of the Preston Down Trust, which is before the First-tier Tribunal but currently stayed, pending negotiations between the parties.

Role of the Charity Commission

The Government starts off on from the footing that the Charity Commission will continue in its present form; however, it supports PASC’s view that the Commission’s core role must be to regulate the charitable sector. It also supports the recommendation that HMRC and the Commission should work more closely together.

Hodgson recommended that the Commission should not be producing guidance on issues that are not concerned with charity law unless it provides clarity on an issue that directly impacts on charity law and is published jointly with another organisation that can provide authoritative advice. The Government says that this is a recommendation for the Commission and that the Commission’s guidance helps trustees to understand their duties as charity trustees; however, it agrees with Lord Hodgson’s recommendation that the Commission should produce

“a single piece of guidance setting out how it defines each of the charitable purposes and the factors it will consider when applying those definitions to decide whether an organisation qualifies as charitable”.

Exception, filing of accounts and associated matters

Church congregations belonging to the Baptist Union, the Congregational Federation, the Fellowship of Independent Evangelical Churches, the Unitarians, the Presbyterian Church of Wales, the Church of England, the Church in Wales, the Methodist Church, the Quakers, the Strict and Particular Baptists, the Union of Welsh Independents and the URC are exempted from registration with the Charity Commission by the Charities (Exception from Registration) Regulations 1996. (The Regulations do not apply, for example, to the Roman Catholic Church or the Salvation Army because the way they are organised – as single diocesan charities in the case of the Roman Catholics and as a single UK charity in the case of the Army – means that they exceed the £100,000 threshold.)

The 1996 Regulations envisaged a five-year exception; but that has been extended by subsequent amending Regulations. The current exception is due to expire at the end of March 2014 and the Government will have to take a view on whether or not to extend it further. For the moment, the Government has rejected Hodgson’s recommendation that the registration threshold for excepted charities should be lowered – first to £50,000 and then to £25,000 – over a period of three years, on the grounds that

“now is not the right time to require smaller excepted charities to register with the Charity Commission. Our main concern is that to do so would impose an unnecessary regulatory burden on several thousand small charities at a time when many may be under pressure”.

The Government said that it will set out its specific proposals once it has concluded discussions with the excepted charities’ representative bodies later this year; however, it is by no means an easy call. On the one hand, the exception is indeed an exception from the general rule; on the other, over the past few years the Charity Commission has had to reduce its staffing in response to a considerable reduction in resources – which leads one to wonder whether it could cope with an immediate end to excepted status.

A straw in the wind might be the Government’s rejection of the recommendation to align the requirement to submit accounts and reporting information with the registration threshold. Similarly, ministers rejected the recommendation that all compulsorily-registered charities should be required to submit their accounts and annual return to the Commission and that they should be made publicly available on the Commission website.

Public benefit

The Government accepts that there has been a lack of certainty in relation to religious charities and public benefit following the Charities Act 2006 and supports PASC’s conclusion that it would be reasonable to consult Hansard to find out the ministerial intent behind the statute. However, ministers feel that it is for Parliament, not for the Charity Commission or the Government of the day, to define the criteria for charitable status, including what is meant by “public benefit”, and for the Charity Commission to determine whether organisations meet those criteria in individual cases. As noted above, the Government agrees with Lord Hodgson’s recommendation not to pursue a statutory definition of public benefit at present; however, “the possibility of change should not be completely ruled out, particularly in light of any developments in the case law”.

Political campaigning and independence

We have already noted some of the controversies over the content of the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Bill in relation to its allegedly chilling effect on campaigning by charities – and the Government’s subsequent climb-down on the issue. As to the more general issue of political campaigning by charities, the Government accepts PASC’s recommendation against any changes to the current rules: it will continue to be for the Charity Commission to consider, case by case, whether or not a charity has overstepped the mark. However, the Government supports PASC’s recommendation that charities should be more transparent about their political and campaigning activities.

Conclusion

As noted in Sunday’s weekly roundup, neither PASC nor the Government mentioned the case of the Preston Down Trust currently before the First-tier Tribunal. The case is currently stayed pending negotiations between the parties; but if the Tribunal finds against the Commission there will no doubt be further pressure on the Government to define “public benefit” in statute. That pressure will no doubt be resisted; but for how long ministers (of whatever political persuasion) can hold that line remains to be seen.

Finally, it should be noted that the Hodgson Review was undertaken against the background of the incoming Coalition Government’s review of Non-departmental Public Bodies in its 2010 Structural Reform Plan and the Public Bodies Act 2011. Given the Government’s earlier unsuccessful attempt to restrict the activities of the Equality and Human Rights Commission, it is interesting to compare its 2010 comments on EHRC (“Retain, with better focus on its core regulatory functions and improved use of taxpayers’ money”) with those on the Charity Commission (“Retain on the grounds of impartiality”). That might suggest that the intention was to take a stronger line with the EHRC than with the Commission – which would be consonant with the general mood-music on human rights in some parts of the Conservative Party.