Charities Commission speeches

William Shawcross - Charity 2000 event

March, 2013

My priorities as chair

Good afternoon. I am delighted for this opportunity to discuss my priorities as Chair of the Charity Commission with you.

And I am thrilled that we are meeting in such illustrious surroundings.

Lawyers, including those from Farrers, have played a proud role, over centuries, in representing charities and helping develop charity law.

Of course, this has occasionally involved challenging the Commission.

And while crossing swords with lawyers can be a tough experience, we know they are vital to the success of charities.

In helping their charities, solicitors and barristers keep the sector strong and the Commission on its toes.

I hope that as Chair, I will do the same.

I have been in post for just over four months. During that time, I have been gaining a detailed understanding of the Commission’s work.

But I am trying to retain an independent perspective.

In that sense, I see my role at the Commission as equivalent to the Commission’s role vis-à-vis charities.

As a firm, if friendly policeman – who is supportive but questions and challenges.
One of my priorities is to maintain that independence of mind.

To keep asking the difficult questions, and to keep expecting excellent answers.
Another priority is to make sure we focus on our core regulatory activity. As the minister for charities, Nick Hurd, said recently, we must “hunker down” to our key purpose – regulation.

As you may know, the Commission conducted a comprehensive strategic review in 2011.

This followed a cut to our budget of a third over four years in real terms.
During the review our CEO Sam Younger and my predecessor Dame Suzi Leather consulted widely with charities, Parliamentarians and members of the public.
There was a striking degree of consensus as to the Commission’s core purpose.
We exist to serve the public, not charities.

We must stick to our core regulatory tasks, including registering charities, providing guidance based on charity law and investigating abuses.
And our strategy must be to promote charities’ compliance with charity law, and to increase trustees’ self-reliance.

I think this is the right approach.

And despite recent criticism by the Public Accounts Committee – which I will come to – I think this is largely working well.

It is now part of my role to ensure the Commission continues to stick to the straight and narrow.

To make sure we use tax-payers’ money effectively.

To ensure that everything we do, we can justify to the public we serve.
My third priority is to fight for the Commission’s resources.

Our budget is already tight. By 2015, we’ll have just over £21 m to regulate a sector that has an income of more than £58bn.

And we’re a tight ship. We have just over 300 staff members, regulating more than 162,000 charities. 10 years ago, we had twice as many people.

We can’t absorb significant further cuts and continue to carry out all of our functions effectively.

Something would have to give.

Parliament would have to decide what. Lord Hodgson, as you know, last year completed his review of the Charities Act.

This largely endorsed our role and functions.

If ministers agree with him – we still await the government’s full response – then I hope they also agree that our budget must not fall further.

In future, it may be that government will have to look at alternative funding models for the Commission.

Many people have said to me that most other industries fund their own regulator, so why should the charity business be any different?
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My other priority is to communicate our work to those interested. To listen to the views of charities, the public and Parliamentarians.

Telling our story won’t always be easy.

Indeed, despite being from a legal family, before coming to the Commission, I hadn’t realised quite how much of the law is argument and debate.

We can’t expect all who take an interest in our work to be charity law experts.
So I want to help explain complex cases in ways that people understand.
Cases such as the Cup Trust.

I recently appeared before the Public Accounts Committee to explain our role in assessing the Cup Trust.

Members of the Public Accounts Committee found it difficult to understand our handling of the case.

Cup Trust is a charity which we registered in spring 2009; it’s simple purpose was to give grants to young peoples’ charities.

A year later it appeared that Cup Trust was also being used to facilitate a scheme whereby the rules on gift aid were being employed both to benefit the charity and individual tax payers.

The committee was concerned – to put it mildly – about such allegations.

When this first came to the Commission’s attention in spring 2010, we investigated the charity for over two years.

We seriously considered whether the Cup Trust was indeed a charity.

We were forced to conclude that it is legally structured as a charity. This view was confirmed by independent legal advice. We were uncomfortable with this.

We considered also whether the charity’s involvement in the gift aid scheme was properly undertaken in furtherance of the trustees’ duties.

On the evidence available to us at the time, we were unable to conclude that they did not do so. This too was uncomfortable.

The scheme was cleverly structured so that whatever happened to the Gift Aid request, the charity’s own assets – much smaller than those being put by taxpayers through the scheme – were not any time at threat.

Indeed the charity also stood to make substantial amounts of money if the scheme were accepted by HMRC.

It remains to be seen whether the charity’s gift aid claims will be successful. So far, no payments have been made to the charity.

From my vantage point, having joined the Commission only late last year, I think we could have been bolder.

In spring 2010 HMRC issued a Spotlight bulletin challenging such schemes. I think we could have taken similar action.

Fundamentally this was an issue for HMRC ---- but it threatened to bring charities into disrepute.

In early 2012, we could have published a report of our investigation to make clear our efforts and to raise public awareness.

Now, our regulatory interest in the Cup Trust continues.

We certainly do not rule out intervention, should that become necessary.
And we plan to publish a detailed report shortly.

It is our declared aim as charity regulator to take strong line in checking abuses in charity.

But we do have to work within the legal and regulatory framework as we do so .
Eminent charity lawyers understand this.

Last week, Christopher McCall QC wrote a letter in which he made clear that the Commission cannot refuse to register a body just because it has doubts about the motivations of the applicants.

In law, what matters are the charity’s purposes.

If the purposes describe an organisation that is exclusively charitable for the public benefit then that organisation is a charity.

Charity law is not the weapon with which to fight tax abuse. The proper weapons are those wielded by HMRC.

The Cup Trust case is complex and I must emphasise we are pretty sure that it is rare.

Most charities demonstrate probity and do much to support vulnerable people in society.

But complex cases demonstrate the difficulties in communicating the work of a regulator.

The public – rightly – has very high expectations of us.

Sometimes these expectations are unrealistic.

People sometimes expect us to step in just because they don’t like a certain charity, or they don’t approve of changes to the charity’s activities.

But a regulator is not a complaints service.

And I would not want to chair a body that investigates charities just because they are unpopular with some, for political or other reasons.

That is the way authorities behave in repressive regimes. Not in democracies.
My impression at the recent Public Accounts committee hearing was that its members hankered after a regulator that can intervene more readily in charities’ affairs.

One, for example, that dictates how much trustees should spend in any given year.
Some people beyond the committee might welcome that kind of regulator.
But this is not what Parliament intended when it set our current objects and powers.

Within the current framework it is for trustees, not the Commission , to run charities. I believe that is correct.

When there is evidence of abuse of charities, we can and do get tough.
Last year, we completed 85 investigations into charities.

And we made thousands of interventions as part of our wider case work to help keep charities within the law, or return them to a legal footing.

Often, our work helps secure convictions and recover lost funds.
The recent conviction of a former trustee of Nottinghamshire Miners Home is a case in point.

That case helped claim back over £200,000 in stolen funds from the convicted trustee.

It is ironic, however, that when regulators do take action, they are often branded as busybodies, whose red tape gets in the way of decent people doing a good job.
Members of the Public Accounts Committee were incredulous that we did not use our powers to remove any trustees last year.

But under the law it is difficult to do so, and we are often challeneged when we try.

A couple of years ago, the Commission removed a trustee during a statutory inquiry.

We felt it was an appropriate step to take given the mismanagement of the charity in question.

Our order was quashed by the Charity Tribunal; the judge said our reasons for removing the trustee were not sufficient.

She said some of our concerns should have been resolved through advice and guidance, not the use of powers. That case demonstrated just how high a threshold the law sets for removing trustees.

The Public Accounts Committee did not think much of such tentative measures.
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A very different example that highlights this point is the response to our guidance on public benefit.

We were instructed by Parliament in the 2006 Charities Act to produce guidance on the public benefit requirement.

Parliament passed the challenge to us.

We consulted widely with the public, with lawyers and with charities. And indeed our guidance was initially well received.

But the Independent Schools Council, which represents the private educational sector, challenged the Commission’s guidance before the Upper Tribunal set up by the 2006 Act precisely to check Commission decisions.

In 2011 the Tribunal reached judgement – it found, inter alia, that the Commission had been too prescriptive in defining the public benefit required.

It said it was not for us to tell trustees how to accommodate people who cannot afford high fees.

In other words, trustees rule, ok ? This judgement has implications far beyond the world of education. I welcome it and the Commission will of course abide by it.

The Charity Tribunal helps bring certainty to the law.

We must always be open to criticism and learn from it, but I don’t think that the sort of aggressive censure that we had from the Public Accounts Committee is always helpful.

I fear that can undermine public trust in the whole charitable system.

This is why I see it as my duty to help the public and Parliamentarians understand our work.

I hope to shine a light on those Commission activities that don’t hit the headlines.

Such as the work we do to prevent problems in charities occurring in the first place.

For example, we recently published new draft guidance dedicated to decision-making.

It explains in simple, plain English, what trustees’ duties are when making important decisions and what good decision-making looks like.

We took this step because our casework tells us serious problems in charities often have their root in flawed decision-making. The guidance is published in draft form.

We are keen to hear from charities – and from lawyers - about what they think of it.

So please share your thoughts with me. Please give me any advice you care to.
We have also published our new guidance on preventing charities being misused to promote extremist views or terrorist ideology.

I consider this one of the most important tasks of the Commission at this time.
This guidance is aimed especially at charities hosting regular events with external speakers, such as students’ unions and charitable think-tanks.

Our guidance stresses that trustees don’t have to avoid controversy as such.
But they do have a duty to protect their charity’s reputation and prevent it being abused for extremist purposes .

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Guidance is not the only way we promote compliance.

Today, we are publishing research by the Institute for Voluntary Action Research which explores the barriers and opportunities charities face when making and receiving social investment.

We commissioned the research to understand better how our investment guidance is being used by charities.

I hope that charities will find the research helpful.

In our analysis of this research, we highlight concerns that some involved in the social investment market do not understand the implications of charity status.
There is a lack of awareness of, for instance, the strict rules around the payment of interest on share capital.

So we urge trustees embarking on social investment to make sure they and their partners are very clear about what it means to be a charity.

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As a final example I’d like to highlight our programme of spot-checking charity accounts.

In 2011-12, we assessed just under 3,500 sets of accounts.

The principal purpose was to check for shoddy reporting and to incentivise good reporting.

We want trustees to know that it could be their accounts next.

In his review of the Charities Act, Lord Hodgson said defaulting charities should be barred from claiming gift aid. We had in fact suggested this.

We think it would send a clear message that the privilege of charity status comes with responsibilities.

The public should not be expected to subsidise charities that fail to take those responsibilities seriously.

Perhaps in the current climate the idea will resonate.

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These are just a few examples of projects that demonstrate that we are a proactive, effective regulator.

There are many more I could mention were there more time.

But in closing, I would like to refer to something which I think is really vital – namely the hard times in which we are now operating.

I have spoken before about the problems some charities face in becoming too dependent on government – central and local.

There is now bound to be a squeeze on many charities, both those receiving Government funds and those dependent on donations from the public as, we continue to face an economic crisis affecting all European democracies, not just Britain.

The German chancellor Angela Merkel put it best last December.

She said that Europe accounts for 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global welfare.

Bluntly that is unsustainable.

I think the changes this crisis calls for are going to be very difficult for everyone.

We will have to alter the habits of decades.

Charities will be amongst those hit hard. So will the people they support.

This is why I feel so strongly about the Commission’s mission as regulator.
I believe the core purpose of charity regulation is to encourage voluntarism.
To install public trust and confidence so that individuals have confidence to support charities, and by extension, the most vulnerable in society.
I hope that the priorities I have set myself as Chair will help ensure the Commission does just that over coming months and years. Thank-you.

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