For The Public Benefit?

In July last year, the Charity Commission published its public benefit assessment reports on 12 charities. It failed 4 of the charities, 3 of them on public benefit grounds. This sparked further controversy in the ongoing public benefit debate.

Some of the press coverage continues to imply that the Charities Act 2006 (the Act) made radical changes in charity law, introducing a new legal definition of charity and 'tough' requirements for charities to 'prove' that they 'provide' public benefit. This seems to be based on the commission's public benefit guidance.

The Act required the Charity Commission to issue guidance to promote awareness and understanding of the operation of the public benefit requirement. This is a statutorily defined term referring to the requirement that, to be a charitable purpose, a purpose must be 'for the public benefit'. In other words, a simple restatement of the law.

The only change that the Act made to the law of public benefit is that it is 'not to be presumed' that a particular purpose is 'for the public benefit'. This, arguably, affects charities established for the relief of poverty, or advancement of religion or education, which historically had the benefit of such a presumption, but they were never exempt from the requirement. It does not affect charities established for purposes for which there was no presumption.

The commission's guidance could have made this clear and, having dealt with the legal requirements, gone on to set out best practice guidance for charity trustees on pursuing their charity's purposes, encouraging maximum access to benefits. The guidance could also have increased public trust and confidence in the sector by noting that charities tend to do this anyway – because they want to, not because they have to.

But, disappointingly, the guidance suggests that the Act "required all charities to operate for the public benefit". The guidance advocates that this is part of the 'public benefit requirement', confusing the legal definition of a charity (and hence charitable status) with the way in which trustees pursue their charity's purposes.

Following consultation, the commission acknowledged 'significant challenges' to its approach, but published the guidance anyway. In principle, this need not matter: it is only guidance, and charity trustees are only obliged to have regard to it. However, the commission is now assessing registered charities on the basis of its guidance alone; the law has been...