Summary of government response to review of the Charities Act 2006

In its long-awaited response to the separate reviews of the Charities Act 2006 by Lord Hodgson and the Public Administration Select Committee, the government has accepted in principle the PASC’s recommendation that the Charity Commission should require charities to declare how much of their spending has gone on political and communications work in their annual returns, and said it would consult on the issue.

It also supported in principle the PASC proposal that the Commission should require charities with income above £5,000 to declare how much of their funding was received from government or other public sources and how much from private donations.

However, it agreed not to make any changes to the existing rules on political campaigning by charities, stating that preserving the current position will protect charities independence and their important campaigning and advocacy roles.

And it rejected the PASC idea of requiring ministers to make a written statement to Parliament whenever the government makes a grant to a charity involved in political campaigning.

The government has also committed to look into the possibility of a system of fines for charities that file their accounts late.

It said it welcomed PASC’s endorsement of Lord Hodgson’s recommendation that the Charity Commission should be able to fine charities that file late returns, and it would explore with the Commission the scope for such a system, giving due consideration to the practical difficulties of such a system both for the Commission and charities concerned. The primary motivation for any such system would be improve compliance rather than to generate funds.

However, it also agreed with PASC that the Commission should not charge charities for new registrations or for filing their returns. There are no plans to introduce charging.

The government has decided to maintain the status quo in relation to paying trustees, but will monitor the number of applications the Charity Commission receives from charities wishing to pay their trustees, and the number it grants and refuses.

As expected, the government agreed with the PASC that the voluntary principle of trusteeship is central to the whole ethos of the charitable sector and that the existing rules on remuneration are adequate for the few cases where payment is appropriate.

In order to increase levels of trusteeship, the government said it would work with the Commission and umbrella bodies to promote charity trustee vacancies through online portals, and said it would welcome sector-led consolidation towards a single trustee vacancy portal in future.

Lord Hodgson’s proposal to raise the threshold for compulsory registration to £25,000 was rejected too.

The Government also said it partially supports a recommendation from Lord Hodgson to increase the income threshold for a full audit from £500,000 to £1million. It will consult on this proposal, but said its preference will be to retain but increase the assets threshold, as it believes that charities that have significant assets should be subject to a full audit even where their income is low.  

The government agreed with the PASC that a charity ombudsman would be a disproportionate and unaffordable response to complaints about the way that charities treat their employees, trustees or volunteers.

In addition, the government pledged to report back to both Lord Hodgson and PASC in a year’s time on progress made in implementing the recommendations that it has accepted.

The government has rejected the recommendation by the committee of MPs that scrutinised the impact of the Charities Act 2006, that Parliament should attempt to define public benefit in legislation.

However, it did add that the possibility of creating a statutory definition in future should not be completely ruled out, particularly in light of any development in the case law.

On the matter of whether religious charities should be assumed to provide public benefit, the government said it supported PASC’s conclusion that it should re-read Hansard to examine what ministers intended when they wrote that part of the Charities Act.

The government decreed that the Charity Commission’s objective of ensuring that charities are aware of their public benefit requirement should remain in place.

The government has also supported Lord Hodgson’s recommendation that the fundraising sector should work together to create a sector-funded, self-regulatory body covering all of fundraising and will formally review its success in 2017.

However, if the initiative fails to make sufficient progress, regulation of fundraising remains a serious option for government.

The Cabinet Office is already funding some work to improve and rationalise the self-regulation of fundraising. 

The government also accepted a recommendation that the Charity Commission, umbrella bodies and the Fundraising Standards Board (FRSB) work together to promote membership of the FRSB, and that the FRSB should audit its members’ compliance and move away from a system that relies on self-certification. The FRSB announced in the summer that it would begin piloting compliance audits of members.

The government also agreed that membership of the FRSB should not be compulsory at this stage, but agreed that there should be an expectation that all fundraising charities with an income over £1million should be members.

Elsewhere, the government agreed with Lord Hodgson that the licensing system for public charitable collections needs to be reformed.

Lord Hodgson recommended a series of changes to the rules for the licensing of public charitable collections, including bringing face-to-face collections under the current regime and the abolishing of National Exemption Orders.

The government has said that it recognises that the existing rules for licensing charity collections are outdated and is working with the fundraising sector and other stakeholders to explore options for change.

The government, however, has confirmed that it will not abolish National Exemption Orders for house-to-house collections, as it would result in significant regulatory burdens for large charities that rely on them.

However, it said it recognised that there is a need to strengthen the system to ensure that the interests of small charities and local licensing authorities are not ignored, and it will work with both to explore options for change.

Finally, the government supported a recommendation that professionals advisers should work to identify a standard form of wording for a charitable bequest that can be used easily by will drafters and members of the public.

Government plans to work with the Law Society, Institute of Professional Will Writers, the Society of Will Writers and the Institute of Legacy Management to scope the potential for improving the drafting of wills.

It has also asked the Law Commission to consider the burden to charities where there is a merger, but a bequest is still connected an original charity which has to be maintained as a dormant shell charity.