Charity Commission

Baroness Barker Excerpts

Thursday 27th February 2014 Grand Committee

Asked by

[Baroness Barker]

To ask Her Majesty’s Government what assessment they have made of the effectiveness of the Charity Commission.

[Baroness Barker (LD)]

My Lords, I declare a few interests. I own a business called Third Sector Business and am a consultant with B&W Consulting, both of which are small organisations that work extensively with charities.

I thank all noble Lords who will take part in the debate. The Charity Commission was founded under the Charitable Trusts Act 1853, and I suspect that the first debate on the subject of its effectiveness probably took place in 1854. It is a subject upon which many people have an opinion and few, if any, are neutral, and it is one to which Parliament returns often in the light of difficult cases. So it is today.

The commission has been heavily criticised in a series of reports over the past 12 months and at the moment appears somewhat beleaguered. The reason for holding this debate today is simple. As long as England and Wales continue to have a large and diverse charitable sector, it is in the best interests of government, charities and, above all, the public that there is an effective regulator of charities. We had the welcome news this week from the Charity Commission that the income of charities in England and Wales has risen by almost £3 billion and now surpasses £61 billion. That is a lot of public money sitting in trust, and the organisations to which it is entrusted have the right to show that they are worthy of that trust.

Today’s debate is an opportunity for Members of your Lordships’ House, with their long and distinguished experience in these matters, to think about ways in which we can rebuild confidence in the Charity Commission’s regulation of charities. It is not an opportunity for another bout of the favourite sport of bashing the commission. Noble Lords will remember that last year the commission appeared before the Public Accounts Committee, which asked the National Audit Office to review the commission’s effectiveness as a regulator and report back. The PAC produced a report written in characteristically scathing terms. It is a shame that the precision and forcefulness of its forensic examination and questioning was followed by a set of rather unclear and unhelpful suggestions for the commission. It would have been more helpful if the PAC had given a clear indication of exactly how it wished the commission to fulfil its functions in future.

The NAO report, the Regulatory Effectiveness of the Charity Commission, was published on 4 December, along with its report on the commission’s handling of the Cup Trust. Those reports do not make for easy reading but they make plain that the problems that the commission now faces are longstanding and are not the fault of the current officers of the commission, or indeed their immediate predecessors.

It is helpful to look briefly at the history of this issue to understand why some of those underlying problems have arisen. In the mid-1990s, charities grew substantially as providers of public services under contract. In 1996 the NCVO produced the Deakin report, which stated that in order to have a vibrant voluntary sector there had to be robust regulation, a clear role for the regulator and a clear legal framework within which the regulator and charities could operate with confidence. In 2001 the NCVO returned to the issue and produced a report entitled For the Public Benefit?, which, again, stated the need for a clear legal framework and, in particular, for there to be clear guidance about what is and is not a charity. That led to the 2004 Charities Bill. Many of your Lordships sat in this room throughout 2005 during the passage of that Bill and had yet more discussions on key issues such as: what is public benefit? I have to say that the decision of Parliament to leave the matter of what is public benefit to be decided by case law presents the commission with an ongoing and enduring problem in delivering its role as a regulator.

Today we are back to the position where the commission has had its budget reduced by one-third and, as ever, there are arguments about the way in which it has gone about pursuing particular cases. However, it is clear that we need to help the commission to recover ground and confidence. I work with lots of organisations, and the best of them—it does not matter which sector they are in: public, private or voluntary—do three things: they have a clear vision of what they are trying to achieve, they have the information that they need to fulfil that vision, and they have excellent relationships with other organisations. Were we to look at the commission in terms of those three issues, that might help us, the Government and the commission to see our way forward.

At heart, there remains a lack of clarity about what the commission’s job is. Following the strategic review of the commission a couple of years ago, everyone has now agreed that its principal role is to be a regulator; that is the unique role that it can fulfil. However, what do we want it to regulate—simply charity law, compliance with charity law, or the increasingly individual charities? In certain parts of government, I think that there is a view that we should have a de minimis regulator along the lines of the FCA, which simply regulates compliance. I do not think that is right. We have the most advanced, complex and vibrant voluntary sector in the world, and we need a regulator that is much more proactive about setting standards of good governance and trust. We need the Charity Commission to regulate within that framework.

On the matter of relationships with other organisations, I have always had a feeling that the commission is a somewhat distant and aloof organisation. In these times of straitened economics, the commission needs to be far more adept at developing good strategic relationships with other organisations. It ought to proactively signpost charities and the million trustees who use its services to go to other organisations for top-quality information and advice. It has always been reticent about doing that in the past.

The principal issue on which there could be a steer from government is the relationship between the commission and other regulators. The report into the Cup Trust has shown clearly that HMRC was at fault. From the beginning, it was clearly an issue of tax evasion and should have been dealt with primarily by HMRC, with some assistance from the Charity Commission on its areas of specialism. In future, that is what the commission should do with all regulators. The onus should be on other regulators, and the Charity Commission should be a specialist back-up point.

In the very little time remaining, I want to say one thing. The budget of the commission has been cut; we all hear about that endlessly. The Government should make one piece of investment: in the commission’s digital strategy. I am sad enough that I use the Charity Commission’s register all the time. It is incredibly clunky; you have to really know what you are looking for. In this day and age, it does not answer the strategic needs of anyone—of government or of the sector. The single most important thing that could be done to encourage public trust in charities—that is what this has all really got to be about—is to require any organisation that calls itself a charity to have the most simple of websites, on which it must have its annual report, its governing document, its latest accounts and its statement of activities. If the Charity Commission were in a position to actively promote digital transparency throughout the sector, far fewer problems would end up at its door. The noble Lord, Lord Hodgson of Astley Abbotts, was absolutely right. There are 175,000 registered charities, and a greater number of very small organisations that call themselves charities but are not registered. The commission alone cannot police every one of them but, with the help of the Government, who are currently pursuing their own digital strategy, it can drive up standards of transparency and accountability. I hope that we will focus on that today.