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Public-benefit test a disaster, says report

14 June 2013

SHUTTERSTOCK

PASSING the buck to the Charity Commission by asking it to determine whether a charity passes the public-benefit test has been an "administrative and financial disaster", the Public Administration Select Committee ruled last week.

The Select Committee has been investigating the implementation of the Charities Act 2006, and published its report on Thursday of last week. It concluded that the Government placed the Commission in an "im-possible position" by putting an obligation on it to produce guidance about how charities could meet the public-benefit criterion for charitable status set out in the Act.

It also recommends that the Government should revise the statutory objectives for the Commission, so that it can focus its "limited resources" on regulating the charitable sector.

The 2006 Act stated that charities must demonstrate that they served the public benefit, removing the presumption that they did so. It did not define "public benefit", but required the Charity Commission to produce guidance on it. This prompted a lengthy legal battle between the Commission and the Independent Schools Council, resulting in a tribunal ruling that the guidance should be withdrawn.

Then, in June 2012, the Commission rejected the application for charitable status from the Preston Down Trust, part of the Plymouth Brethren Christian Church, ruling that it was not satisfied that it was "established for exclusively charitable purposes for public benefit" (News, 3 August). Tribunal proceedings are currently on hold, while the Commission investigates whether a cost-effective alternative is possible.

The Select Committee report concludes that it is "far from happy" with the manner in which the Commission has approached the public-benefit question, but that the Act is "critically flawed" on the subject. The removal of the presumption of public benefit should be repealed, it recommends, and the Commission's responsibility for the matter withdrawn. It is for Parliament to determine the criteria for charitable status, it argues.

The Committee also decided that the objectives of the Charity Commission, set out in the Act, were "far too vague and aspirational", even before budget cuts were initiated. The Commission, which is funded entirely by the Treasury, will have its budget reduced by one third between 2010 and 2015.

The Committee recommends that the Commission should focus on regulation. It rejects suggestions that the Commission charge charities to register, or increase the threshold for compulsory registration, but recommends that it investigate fining charities that make late returns.

The Committee considered "chugging", whereby fund-raisers attempt to persuade people on the street to sign up to direct-debit giving. It said that two-thirds of people had reported feeling uncomfortable with the fund-raising methods used by some charities. The Committee ruled that self-regulation of fund-raising should be "placed on notice", and reviewed after five years. In the interim, self-regulatory bodies such as the Fundraising Standards Board must increase membership, it ruled.

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