The Regulator for Charities in England and Wales
The Bill requires organisations to pass two tests if they are to be charities. Firstly that their objects are charitable, and secondly that they operate for the public benefit. For the first time, the law will require charities which advance education, religion or relieve poverty to explicitly demonstrate they deliver public benefit. The law has previously presumed this to be the case for these types of charities.
The Bill does not contain any new definition of public benefit or suggest how charities should demonstrate public benefit. Decisions on how the public benefit test will operate will, rightly, rest with the Commission, as the independent regulator for charities in England and Wales.
The new public benefit test is not a green-field site. Our decisions must be based on underlying case law. But we will follow the courts’ approach and develop our decisions on public benefit in the context of changing economic and social conditions, including public attitudes.
It is a helpful development that, in future, easier and less expensive appeals against our decisions can be made to the new Charity Tribunal proposed in the Bill and ultimately, of course, to the courts.
There are considerable advantages which arise from charitable status:
There is a clear relationship between these benefits of charitable status and the need for charities to deliver benefit for the public. Charities are precious, and play a vital and unique role at the heart of our society, but like all bodies in which the public places its trust, they should be accountable to everyone for what they do. That is the essence of the public benefit test. It also fits squarely with the Commission’s new objectives in the Bill, particularly the objective to enhance the accountability of charities to donors, beneficiaries and the public.
Our aim will be to ensure both that charities demonstrate public benefit in what they do and, beyond that, continue to increase the value they bring to the communities they serve.
We need to articulate and explain the concept of public benefit in a way which is consistent with the law and clear to the public.
In taking forward our work on public benefit, we also need to ensure that wherever we can we make use of existing accountability processes. For instance, we think that all charities should report what they do for public benefit and we will be recommending that all charities report once a year on this, using the existing reporting framework, as many already do. There is no point in duplication and, in any case, we are committed as an organisation to achieving at least a 25% reduction in the administrative burden of regulation over the next four years.
We will consult widely with the charity sector and the public about the public benefit test.
We have already met some key parts of the sector, including fee-charging and religious organisations, to begin to identify with them:
We have also convened a group of public policy experts, independently chaired, to think through the meaning of the concept and application of public benefit.
We have commissioned a citizens’ forum to research public perceptions and expectations of public benefit.
All these strands will inform our preparation of the guidance which we will issue for public consultation early in the new year.
It is in the interests of everyone if charities become more effective over time. That is why we are keen to ensure that we set up a situation where an organisation that has met the public benefit test still has an incentive to improve its delivery of benefits to the public in the future.
We aim to stimulate this process by establishing with different parts of the sector what the spread of good practice is in delivering public benefit, publicising this and enabling individual charities, where appropriate, to compare themselves with others. This would enable independent boards of trustees working in similar areas to share ideas about how they, and other charities, are achieving results. The improvement efforts which are already being made by many would be showcased more explicitly.
Charities may charge fees for the facilities or services they provide. Charities which charge relatively high fees must demonstrate accessibility to those facilities or services. It will not normally be possible to demonstrate public benefit through indirect benefits alone, such as savings in public expenditure through the provision of a service like education or health.
We think all charities should give an account each year of the public benefit they provide. For fee-charging charities where public benefit is not immediately obvious given the high level of fees charged, one suggestion we will explore is to expect those charities also to assess and report the value of the tangible benefits they bring, alongside the value of the tax breaks they receive.
It is important that the Commission implements the public benefit test robustly, and we are committed to doing this. We are confident that the combination of clear articulation of public benefit provided by individual charities and the spreading of best practice, coupled with the fact that there will be a review of progress to see what has been achieved - with the possibility that Parliament could revisit the issue – will encourage innovation.