Joint Committee on the Draft Charities Bill

Session 2003-04, 30 September 2004


The Joint Committee on the Draft Charities Bill publishes its report on Thursday 30 September at 11.00 am (HL Paper 167-I, HC 660-I, Session 2003-04).

MPs and Peers welcome modernisation of charity law

The Joint Committee on the Draft Charities Bill today published its report, welcoming the Government's proposals for reform and modernisation of charity law, which it believes to be long overdue. It is particularly keen to ensure that smaller charities are not over-burdened by regulation, and would like to see charities given greater freedom to trade. Further key recommendations concern the role and remit of the Charity Commission and the Charity Appeal Tribunal, the accountability of professional fundraisers, the definition of public benefit and the clarification of charitable purposes, especially those relating to religion and the promotion of religious and racial harmony.

The Committee recognises the huge diversity of the sector and has been particularly concerned to hear from the many smaller voluntary-run local charities during the course of its inquiry. George Foulkes MP, acting chairman, said:

"We strongly believe that charitable endeavour continues to be the cornerstone of a caring society comprised of active citizens. Charities are valued as organisations independent of Government. We would like to see charities playing an even bigger role and believe that many have the potential to contribute to the modernisation of public services and the enhancement of civic responsibility. Our assessment of the Bill and the recommendations we make are based on a desire to see charities - and charitable endeavour and income - grow, not diminish, in our country."

Key recommendations

The report's 52 recommendations include:

Charitable purposes

The Committee agrees that the public understanding of charities would be improved if the currently accepted charitable purposes were spelled out more clearly in statute (2). It further recommends that:

• the definition of religion in the draft Bill should be clarified to include non-deity and multi-deity groups (paragraph 54);

• an additional charitable purpose be added to 2(2) for "the provision of religious harmony, racial, harmony, and equality and diversity". (paragraph 56);

The role and powers of the Charity Commission

Although the Committee believes that the actual impact of the draft Bill on small charities will be marginal, it considers that the Bill needs to contain some safeguards against over-regulation:

•The Bill should include a provision obliging the Charity Commission to use its powers fairly, proportionately and reasonably (paragraph 169);

George Foulkes MP, the acting chairman, said: "The Committee believes it is essential for the health and vitality of the charitable sector as a cornerstone of modern civil society to be free from unnecessary and potentially harmful regulation".

Fundraising and public collections

The Committee broadly endorses the plans for fund-raising and public collections, but is concerned that the written material, provided at the time to those making donations by direct debit or standing order, should explain the nature of their remuneration (i.e. whether they are paid a salary, a fixed fee or whether they are paid on a commission basis). It differs from the draft Bill on this point:

•  We recommend that, while local authorities should retain powers of enforcement, the Charity Commission, rather than local authorities, should be the lead authority for granting certificates of fitness to carry out public collections. (Paragraph 316)


The Committee has received evidence to suggest that there would be clear advantages to allowing charities to trade more extensively within the charity. But while they consider that further powers to trade are desirable, there should remains a higher limit to them. That limit should be higher than the existing limit of £50,000 a year.

• The Committee recommends that the draft Bill should be amended to allow charities to trade within the charity and enjoy tax exemption on trading income up to the point where income from trading equals 25% (or £5,000 if the greater) of the charity's total turnover, but this should be subject to an overall limit higher than the current £50,000 and the Government should consult on the level at which that overall limit should be set. (Paragraph 354)

George Foulkes MP, said: "We don't believe that the Government's stated objection to further powers of charitable trading - unfair tax advantages to charities compared to private business - has been borne out." 

Public benefit

The Committee recommends that the basic principles for a definition of public benefit should be those set out in the recent concordant between the Home Office and the Charity Commission (as in the box after paragraph 78 of the report) and that those principles should be replicated either in non-exclusive criteria included in the Bill or in non-binding statutory guidance issued by the Secretary of State (paragraph 102).

In paragraph 95, the Committee says: " we believe that the Government should consider reviewing the charitable status of independent schools and hospitals with a view to considering whether the best long term solution might lie in those organisations ceasing to be charities but receiving favourable tax treatment in exchange for clear demonstration of quantified public benefits."

The future

The Committee also calls for explicit success factors to be measured and for a single consolidated Charity Act 2005:

• The Bill should contain a requirement for the Secretary of State to review and report to Parliament on the impact of the Act no later than five years after Royal Assent and that report should include an assessment of the effect of charitable legislation on public confidence in charities, the level of charitable donations and the willingness of individuals to volunteer (paragraph  393).

• We recommend that the Bill to be brought forward by the Home Office in the next parliamentary session should combine the provisions of the draft Bill with the surviving sections of the 1992 and 1993 Charity Acts to enact a single Charity Act 2005. (Paragraph 383)



 1   The Committee was appointed in May 2004 to consider the draft Bill published on 27 May. It has held eight oral evidence sessions and received over 350 written submissions. The Committee was chaired by Alan Milburn MP but, after his appointment to the Cabinet as Chancellor of the Duchy of Lancaster on 8 September, he took no further part in the Committee’s proceedings. The report was agreed unanimously, with George Foulkes MP in the chair.

2    Clause 2(2) of the draft Bill defines twelve charitable purposes:

a) The first three existing purposes:

i) the prevention or relief of poverty;
ii) the advancement of education;
iii) the advancement of religion;

b) eight new purposes to be set out in statute but already recognised in case law:

i) the advancement of health;
ii) the advancement of citizenship or community development;
iii) the advancement of the arts, heritage or science;
iv) the advancement of amateur sport;
v) the advancement of human rights, conflict resolution or reconciliation;
vi) the advancement of environmental protection or improvement;
vii) the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
viii) the advancement of animal welfare;

c) any other purposes recognised as charitable purposes under existing charity law or any purposes analogous to the defined purposes.

3  Copies of the report

The report can be ordered from The Stationery Office (tel. 0845 702 3890/3474, or can be viewed on the Committee’s website from 4.00pm on the day of publication.

4  Contacts

For inquiries, please contact the Clerk of the Joint Committee on 0207 219 8387

5  Membership of the Committee:

Chairman: Rt Hon Alan Milburn MP (Lab, Darlington).

Lord Best (Crossbench); Lord Campbell-Savours (Labour); Earl of Caithness (Conservative); Baroness McIntosh of Hudnall (Labour); Lord Phillips of Sudbury (LibDem); Lord Sainsbury of Preston Candover (Con); Mr Alan Campbell MP (Lab, Tynemouth); Rt Hon George Foulkes MP (Lab, Carrick, Cumnock and Doon Valley); Ms Sally Keeble MP (Lab, Northampton North); Mr Andrew Mitchell MP (Con, Sutton Coldfield); Bob Russell MP (LibDem, Colchester).