Charities Regulation Under Scrutiny

By Alan Ware, Emeritus Fellow, Worcester College, Oxford & Senior Research Associate, UCL School of Public Policy

Charities Regulation Under Scrutiny

This post is a response to the Centre for the Study of British Politics and Public Life’s event Charities Regulation Under Scrutiny, held on 16 February 2016.

Regulating charities is extraordinarily complex because unlike most regulated organisations they are so diverse. There are about 160,000 of them and they share just one feature – they opted for a particular legal status, first established in 1601.  Only those bodies that meet a statutorily defined notion of “public benefit” are entitled to the privileges charitable status provides, including not being liable to corporation tax, for example. They vary enormously in size, in whether they rely or donations or on other sources of incomes (such as contracts, fees or grants), in whether or not they make use of volunteers, and in many other ways. Perhaps the most significant respect is whether they are subject to oversight by the Charity Commission or are exempt, as are universities and private schools, for which other regulatory agencies now usually have responsibility.

Given the size and diversity of the charity sector it would take a massive agency to regulate effectively. However the Charity Commission, first established in 1853 in the wake of decades of asset stripping of many local charities by corrupt officials, could never do that. It remains a relatively small body, that until recently defined its role not so much as one of active oversight but in terms of giving advice to charities about to how to comply with legal requirements. That is why self regulation through bodies set up by charities themselves, as with the recent establishment of the Fundraising Regulator, is as important an element of policing the sector as the Commission itself. You could not police a town of 160,000 people with a small constabulary; you would have to rely on the community supporting norms of behaviour that lead to general compliance with the law. This has always been the situation with charities. So what has changed to bring charities into the limelight?

First, many of those charities that depend on donations or legacies have changed how they approach the public. It used to be illegal even to shake a collecting box to draw the attention of someone passing you on the street. Now busy pedestrian areas have a different charity every few days approaching people to interest them in the work of that charity. “In your face” soliciting may raise money but it also irritates enough people to draw attention to the practice. In an era of social media individual incidents can become famous instantly. The same is true of data sharing and multiple contacts with old people in pursuit of legacies. Such direct forms of contact with the public can be financially beneficial but also generate harmful effects.

Secondly, just as many people have a naive gut reaction that MPs should be paid very little because they serve the public, so charities are supposed to be parsimonious in the salaries they pay officials and the money they spend in support of their core activities. It is a prejudice that in both cases is perpetuated by papers like the Daily Mail and Daily Telegraph. The notion that if you pay peanuts you get monkeys is one that the papers choose to overlook in their pursuit of sales. Many members of the public have to be prompted even to think about that.

Third, the political roles of charities have become more contested. Once those charities delivering goods or services to those in need move away from being mere delivery services they are subject to a major problem. Part of what they are supposed to be doing necessarily involves campaigning, because they exist to deal with a social problem effectively, but this draws them into the prohibited field of political activity. What they should or should not do under the law has become more controversial.

Finally, one problem likely to emerge is the legal demands now made of Trustees, many of whom earlier never knew what their responsibilities were. While there are good reasons for demanding more of Trustees in this respect, it comes at a price. In the future some organisations eligible to be charities may well decide not to acquire that status, and some existing ones may de-register and re-organise. As a former Trustee of a charity and also a Board member of an organisation that is eligible for charitable status, but has never been tempted to apply for it, I think that for some bodies it will become even more evident that charitable status is too restrictive for them.

Listen to a recording of the event: