Is public benefit a can of worms?

By Iona Joy 6 June 2013

In a report published today, the Public Administration Select Committee  (PASC) recommends that the public benefit provisions in the Charities Act 2006 are “critically flawed” and should be repealed.

For an organisation to enjoy the benefits of charitable status it must exist for a purpose which is beneficial to the public. The law in this area underwent a major codification with the introduction of the Charities Act in 2006. However, what on earth does public benefit mean? This latest report opines that it is not for the Charity Commission or the courts to define what public benefit means or the criteria by which charitable status is set, but rather a matter for Parliament. Although I’m not totally clear on how they are proposing this would work. The hard task of defining public benefit will be a right old can of worms, and very political. And a statutory definition would soon date. I wouldn’t go there myself!  But it would be constructive to set decent and clearly-defined criteria for charitable status.

The PASC is much keener for the Commission to focus scarce resources on regulating the sector. We agree—further Cup Trust fiascos should be avoided at all costs—and not waste effort on other vaguer aims. Its governance documents refers to ‘its core objective to increase the public’s trust and confidence in charity’ (see 4.3). And I think this gives rise to conflicts of interest, which is why we have these debates as to whether being  an uncompromising regulator creates distrust. I can see why it is in there, but I don’t think increasing public trust and confidence of sector is the job of a regulator. It’s the job of the sector itself to earn that public trust and confidence. So let bodies like NCVO and ACEVO boost charities’ status, allowing the regulator to be neutral and toothsome. Its also better for beneficiaries if charities do not get special pleading from a government body.

The report also recommends that charities should be required to publish their spend on campaigning and political activity in their annual returns. A stronger emphasis on transparency is vital, and reassurances that charities are not engaged in “inappropriate” political activity are welcome. But we need to be clear that campaigning is a legitimate thing for charities to do. This raises another, to my mind, much more crucial point: that all charities, even funding ones, should report on their impact. I’d loved to have seen what Cup Trust had to say about their impact, had it been a requirement. And I’d love to see the feet of some other organisations held closer to the fire on this. We see some very obscure organisations of a decent size where we have no idea what they are about and what they are achieving with public money.

If there was pressure to talk more about impact, this would be a more compelling way of countering criticism of the charity sector, and demonstrating what charities actually achieve with their money.

It’s through telling the story of charities’ achievements—showing that they are really pushing the needle on major social issues—that the perpetual noise around administration costs will eventually begin to fade. Removing the suspicion around what charities actually deliver is the means to restoring and maintaining public trust in charities.