New Chairman needs to re-establish trust in its competence


The Charity Commission is the independent regulator of charities in England and Wales. Its mission is to be the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that: charities know what they have to do the public, know what charities do; charities are held to account. But its reputation has received a sustained battering recently.

Under its previous Chairman, Dame Suzi Leather, DBE, DL, the Commission invested significant time and resources in challenging the charity status of independent schools, implying that the key public benefit test for schools was the number  of bursaries on offer rather than other types of benefit offered by schools. It was always plain wrong to focus on  encouraging independent schools to offer more bursaries to qualify as charities as there are two significant negative consequences. First, it serves to remove from state schools the brightest pupils, who are important role models and drivers for improvement in other pupils performance in their respective schools, while concurrently signalling that the state system cannot educate the brightest pupils. Secondly, by definition it benefits the few rather than the many. If the aim of the public benefit requirement is to maximise public benefit then it is much better, surely, to encourage meaningful partnerships between state and private schools   so that they can share resources, facilities and specialist teaching.  The Commission then issued opaque guidance which did nothing to clarify the issue for those who ran independent schools. It was successfully challenged in court by the Independent Schools Council which secured a judicial review. The Upper Tribunal gave its judgment in October and December 2011. In short, the judgement found that the Commission had failed in its efforts to provide clarity on this, albeit complex, issue. The Tribunal found that parts of the Commission’s guidance on public benefit were in fact ‘obscure’ or ‘wrong’. The Tribunal ruled that it is for the trustees of a fee-charging charity to decide how best to meet that obligation in the circumstances of their charity (not for the Commission, the Tribunal or the courts), provided they did so in a way that any reasonable trustee would have done, and that support should not be tokenistic. The ISC had claimed, plausibly, that the Commission was making the law up as it went along. As far as the  judicial reviews verdict  went, the ISC  thought that it  provided clear and workable guidance for schools and their trustees on what public benefit means, both in theory and in practice.

More seriously, the influential Public Accounts Select Committee has severely criticised the Commission, in a report published this week. In January The Times revealed that the Cup Trust , a charity regulated by the Commission, had raised a total of £176 million, of which only £55,000 had been used for its stated objective of helping to “improve the lives of young adults and children”. The charity was in fact an avoidance scheme that allowed it to claim £46 million in tax relief. The MPs say that it was unacceptable that the commission had allowed the Cup Trust to register as a charity when there were clear signals that should have prompted an investigation. The Committee concluded “We do not believe that the Cup Trust ever met the legal criteria to qualify as a registered charity,” and “The Commission’s approach to regulation and enforcement lacks rigour”. The commission is conducting an inquiry into its handling of the Cup Trust, opening  a statutory inquiry into the Cup Trust in April 2013 and has  used its powers to appoint an interim manager.

William Shawcross, its new chairman, admits the Trust imbroglio  has been a disaster for the charity sector, but is  nonetheless refusing to place in the public domain ,correspondence relating  to  the Cup Trust, which hardly inspires confidence.

The Commission is supposed not only to regulate the sector but it also has stewardship of its reputation. The sector depends as the Times points out ‘on trust, the trust of donors that the money they give will be spent in the way they want and the trust of taxpayers that charities are actually supporting worthwhile causes.’ There is now a crisis of confidence in the Commission and its sins of omission and commission are driving the headlines. This is bad for it and bad for the charity sector. It should be careful and needs to prove that it is fit for purpose under its new chairman.

PAC Report- Charity Commission: the Cup Trust and tax avoidance


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