Government responds to Lord Hodgson’s recommendations

The government has rejected Lord Hodgson’s recommendation to allow large charities to pay their trustees without authorisation from the Charity Commission and will also not abolish National Exemption Orders for house-to-house collections before an alternative system is devised.

The Cabinet Office has produced its interim response to Lord Hodgson’s review of the Charities Act 2006, nearly five months after he published his report. It is an interim response because the Public Administration Select Committee is still carrying out its inquiry into the Act and regulation of the sector, and expects to publish its own recommendations early next year. The government will wait to see what these are before publishing its full response to Lord Hodgson.

In a comprehensive letter to Lord Hodgson dated 3 December, minister for civil society Nick Hurd provided a green, amber or red rating to each of the principles underpinning Hodgson’s recommendations, to signify which the government supported, which it rejected, and which it felt could be accepted if more work were done.

The only one to get an outright ‘red’ was payment of trustees. Hurd said the feedback from the “vast majority” of charities did not support this proposal, and there is no strong evidence that paying trustees would result in more effective governance.

Thus the government supported maintaining the status quo but monitoring the volume of applications to the Charity Commission and the numbers it grants or refuses. “If over time there is perceived to be a particular problem with this approach then we can revisit it,” Hurd said.

The government is not inclined to revisit the prospect of a statutory definition of public benefit, or even a part-definition: “We are not sure that this would provide much additional clarity over the existing case law and the Charity Commission’s guidance, without risking unintended consequences.”

It is also not persuaded of the value of rebranding the Charity Commission as the Charity Authority, while research shows that public awareness of the regulator is improving.

Hurd gave an amber rating to the suggestions of allowing the Charity Commission to charge fees and raising the thresholds for registration, saying both would require further examination of impact.  He recognised the extra burden that fees would place on charities in the current economic climate, and said that any raising of the registration threshold could only happen if smaller charities were able to register if they wanted.

And while the government would explore how to reduce the red-tape burden of registering with both the Charity Commission and HMRC, any potential benefits will need to be weighed up against the costs of changing IT systems.

He recognised, however, that the Charity Commission “lacks a proportionate range of sanctions” for dealing with late filing, and said more work would be done to address this.

The government seemed open to the idea of giving charities more freedoms during mergers around legacy donations and land disposals, and said it would set out its view more fully on each of these matters in its full response.

It agreed with Lord Hodgson’s recommendation not to establish a charities ombudsman or to extend the remit of an existing ombudsman to consider complaints about charities’ services.

On self-regulation of fundraising, Hurd welcomed the progress already made by the Institute of Fundraising, PFRA and FRSB to rationalise the regulatory landscape and strengthen the self-regulatory regime.
 
He also said that the National Exemption Order scheme for house-to-house collections would not be scrapped until an alternative scheme is in place that works for both charities and local authorities – and he was sure that this was what Lord Hodgson had intended.