Charity Law Review – Unshackling Good Regulation?

At a time when we are still dealing with the strong feelings caused by the MPs expenses scandal and media hacking, Government’s focus on cutting red tape for charities may seem a contradiction. However I agree – together with most within the sector – that charities are dealing with a myriad of regulatory and licensing requirements that can hinder their day to day activities. This deregulatory thrust was also the key driver in the recent review of the Charities Act 2006, as made obvious by the fact that Lord Hodgson was appointed as official reviewer (following his previous role as leader of the ‘Task Force on Cutting Red Tape’).

And so it is that the final report ‘Giving Charity Back to Charities’ contains a number of proposals to simplify the current regulatory framework (for example with regards to the accounting and reporting process, and easier ways to access the Tribunal).
There are cases when rules are in place for a good reason, because they are necessary and appropriate. The steps they require for compliance are minor compared to the potentially huge negative effects that their removal would cause.  This is most obvious with relation to the issue of trustee payments, an issue that has always caused debate and divided opinions (as Karl’s blog proves). Lord Hodgson’s proposal to give charities above the £1m income threshold automatic power to pay trustees would set a dangerous precedent and is a deregulatory step too far. It also seems unnecessary, since charities can already seek the Charity Commission’s permission if they want to pay their trustees and that system is working well. By making the right automatic, the risk is to undermine the value of voluntarism which defines the sector primarily because it would blur the boundaries between commitment to a cause and financial reward. Such a change also goes against the public mood – Lord Hodgson’s own report identifies that the majority of the public oppose the idea of paying trustees. Considering that the most recent survey into public trust and confidence has shown that charities continue to rank high on the list, surely this is something we want to maintain rather than put in jeopardy?

Lord Hodgson has also proposed a number of changes to the registration system, most notably raising the basic threshold for compulsory registration to £25,000. But far from being a burden, most charities see registration as a good thing, since it gives them the badge of being a ‘registered charity’ – a welcome status in their relationship with potential funders and the general public.

This is not to say that the report overall isn’t to be welcomed: there are many proposals that if taken forward could really make a difference to those who run charities and have to deal with the increasing amounts of paperwork this entails.
But not all regulation is bad; we trust that Government will uphold the principles that make the sector special and maintain public confidence.

Over the next couple of days we will be posting more blogs on some of the other proposals as we go through the report.

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Avatar photo Elizabeth was head of policy and public services at NCVO until 2020.

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