Main Points of the UK Draft Charities Bill

Draft charities bill report: main points

Tash Shifrin rounds up the main conclusions of the parliamentary joint committee's report on the draft charities bill published today

Tash Shifrin
Thursday September 30, 2004
SocietyGuardian.co.uk

Public benefit

· The report repeats the committee's criticism of the "schism" between the Charity Commission and the Home Office over how a public benefit test would be applied to private schools. "The [Charity Commission's] interpretation left the draft bill in the ludicrous position of promising to bite the public benefit bullet, without having the teeth to do so," it states.

· The principles for a definition of public benefit - central to the bill's new definition of charity - should be set out either in non-exclusive criteria included in the bill or in non-binding statutory guidance issued by the home secretary, the report states. The principles should be based on the recent agreement drawn up between the Charity Commission and the Home Office. The committee rejected the options of writing a full definition of public benefit into the bill or leaving the matter entirely to the Charity Commission.

· The government should consider reviewing the charitable status of private schools and hospitals, and look at the possibility of removing their charitable status while retaining favourable tax treatment "in exchange for clear demonstration of quantified public benefits".

· The bill should clarify the effect of loss of charitable status. The government should consider including measures that would allow trustees to retain their assets to run the organisation as a not-for-profit body without charitable status.

Charitable purposes

· The report calls for an extra charitable purpose - "the provision of religious harmony, racial harmony, and equality and diversity" - to those listed in the draft bill. It wants an extra clause to make clear that "the advancement of religion" includes non-deity and multi-deity beliefs. It also calls for the words "and culture" to be added to the new charitable purpose of the advancement of arts, heritage and science, and "the saving of lives" to be added to that of the advancement of health.

Regulation and the Charity Commission

· The controversial new objective for the Charity Commission, to ensure charities maximise their "social and economic impact", should be dropped.

· The government should commission a review of the burden of charity regulation to ensure it is fair and proportionate, especially to smaller charities. The bill should include a duty on the Charity Commission to act fairly, reasonably and proportionately.

· The Charity Commission should be required to tell charities that it is investigating, under section 8 of the 1992 Charities Act, why it has launched an inquiry into them.

· The new independent appeals tribunal should be able to review all decisions of the Charity Commission - including the decision to launch inquiries under section 8. It should also be able to award compensation and/or costs against the commission.

· The bill should include a stronger statement on the independence of the Charity Commission from government. The commission should appear each year before the Commons home affairs select committee and its annual report should be debated by parliament.

· The committee says the evidence it heard "has given us reason to question whether the Charity Commission is properly organised and properly resourced to make it effective in its new tasks". There should be a review of the commission, looking particularly at "the quality of its processes, methods and organisation" and "the calibre of its staff" as well as its resources.

Fundraising

· Explanatory notes, published with the bill, should set out the criteria on which the home secretary will decide whether a new self-regulation system for fundraising is working effectively. The Home Office should review the proposed system to make sure it can root out cases of bogus fundraising, similar to those highlighted in evidence by Leeds city council.

· The committee makes a series of recommendations to ensure paid professional fundraisers make their status clear to the public. Written material should set out how they are paid - by salary, fixed fee or commission - and fundraisers should also carry an identification card from the charity for which they are collecting. This "could be supplemented" by a requirement for charities to state the basis on which fundraisers are paid, and the ratio of costs-to-funds raised, in their annual reports.

· Commercial participants in fundraising drives should be required to make as accurate a representation of the return from the venture as possible. Either the Charity Commission or trading standards officers should have the power to prosecute where these measures are breached.

· Local authorities should retain powers to license street fundraising, but the Charity Commission should be the body to grant certificates of fitness to carry out public collections.

Trading

· The bill should be amended to let charities trade directly, without setting up a separate company, and enjoy tax breaks on trading income - up to a point where trading income reaches 25%, or £5,000 if greater, of the charity's total turnover. This is a compromise, suggested after the government rejected proposals by the prime minister's strategy unit in 2002 to allow direct trading by charities.

After the bill

· The committee wants to see the new bill and the Charities Acts of 1992 and 1993 consolidated into a single charities act to make it easier for small volunteer-run charities, among others, to understand.

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