Written evidence from the Charity Commission for England and Wales (UKR0083)

Introduction

1. The Charity Commission is the registrar and regulator of charities in England and Wales.
2. The five statutory objectives that underpin all our work are to:
1. increase public trust and confidence in charities
2. promote awareness and understanding of the operation of the public benefit requirement (the requirement that charitable purposes must be for the public benefit)
3. promote compliance by charity trustees with their legal obligations in exercising control and management of their charities
4. promote the effective use of charitable resources
5. enhance the accountability of charities to donors, beneficiaries and the general public
3. We maintain an up-to-date register of charities, which includes deciding whether organisations are charitable and should be registered. We also remove charities that are not considered to be charitable, no longer exist or do not operate.
4. Through our compliance function, the Commission takes enforcement action when there is misconduct and/or mismanagement in the administration of a charity. We ensure charity trustees meet their legal requirements. The Commission also has an enabling function. This involves providing advice and guidance to charity trustees and giving permission/consent for trustees to take certain actions, so long as this is in the best interest of the charity.
5. We welcome the chance to provide evidence to the Committee as part of this inquiry. The independence of regulators, clarity of their remits, and scrutiny and accountability are important themes to consider. As some questions are of lesser relevance to the specific role and legal framework for the Commission we have responded thematically.

Independence

6. The Charity Commission for England and Wales is a non-ministerial department. Independence – not just from Government, but from our regulated community and other stakeholders – is one of our core regulatory values. Our 2024-2029 Strategy, due to be published shortly, will further express what this means for our day-to-day work and approach.
7. We are supported in operating independently by the framework provided in legislation, and by our status as a non-ministerial department. It is explicitly set out in Section 13(4) of the Charities Act 2011 that the Charity Commission is not subject to the direction or control of any ministers or other government departments in the exercise of its functions, preserving our operational freedom. Our accountability is to Parliament, and the courts, rather than to the Government.
8. Our relationship to the Department for Culture, Media, and Sport (DCMS) and to its Ministers, who serve as our sponsor Department within Government, is based around a shared common objective of ensuring the effective regulation of the charity sector in England and Wales, so that charity can thrive. DCMS Ministers also answer for us in the House of Commons, and the Lords Minister in the House of Lords. The parameters of our collaboration are set out formally in a published Framework Document. This is explicit in setting out that the processes and safeguards we have in place are to preserve the independence from Government of our regulatory decision-making, whilst still ensuring each party is appropriately informed of the others actions. We judge this to be an effective system. To further reinforce our independence, as a non-ministerial department our funding settlement is negotiated directly with HM Treasury, rather than through DCMS. This further separates our policy and regulatory functions from funding availability.
9. The organisations we regulate can be involved in politically contentious topics, on which Government ministers are entitled to their own perspectives and policies, as are members of the public. It is not the Commission’s job to take a view on matters outside the law, such as the validity of each charity’s position in a topic of social debate. Our remit is to determine if they have complied with the law, including the duties and governance responsibilities of trustees. We are confident that all parties understand our approach here. It is our focus on independence that ensures our motivations are understood to be free from inappropriate influence, and through this that we are equipped to credibly take difficult regulatory decisions.
10.                     Clarity of role
11.                     The Commission is amongst the oldest regulators in England and Wales, having been established in 1853. Whilst the legal framework has evolved during this time, the consistency in our focus means that we do not face some of the challenges more recently established regulators might regarding the boundary between our function, and that of Government.
12.                     The diversity in scope and scale of the charitable sector does mean that our regulatory landscape is complex. Amongst many other examples, we intersect with regulators in the fields of education, health and social care and housing, as charities are an important part of service provision in these sectors. We are focused on charity governance, in particular ensuring that the trustees who run charities are aware of their duties and responsibilities in charity law, and have what they need to govern their charities well. Our remit does not extend to standards, such as whether a particular operational activity is well delivered. Our fellow regulators may be responsible for one, or both of those aspects, in regard to separate regulatory frameworks they operate for their sector. We are experienced and well used to navigating the points of intersections that do exist between these responsibilities. We have developed for each a joint Memorandum of Understanding, underpinned by necessary information sharing arrangements and gateways to create a positive dialogue with other regulators. We collaborate on addressing issues that are raised with us that may impact both of our responsibilities, in a risk-based fashion.
13.                     Sometimes other stakeholders, and particularly members of the public who may wish to make a complaint, struggle to determine whether a matter is most appropriately raised with the Commission or with another regulator. It is important that issues do not fall into a gap between regulatory regimes. Helping signpost the public to the correct source of support will be part of our 2024-2029 Strategy. It is important to us that, wherever public expectations or sector practice has evolved, HM Government looks at opportunities to scrutinise sectors where any gaps may have unintentionally developed in regulatory oversight. We welcome steps in these cases to ensure that co-regulators have the appropriate powers or resource to address risks (across charities and non-charities operating in their regulated landscape). A good example has been recent legislation related to the Social Housing sector.
14.                     As we have to prioritise what issues we look at with our resource, and because we are under a formal duty to ensure any use of our powers is appropriate and proportionate, we take a risk based approach to determine our action. We prioritise cases where there is evidence of the most significant risk of harm to address, looking at the impact upon charity beneficiaries, assets or if there has been serious wrongdoing. We ensure we are transparent about this, operating according to a published Regulatory and Risk framework.
15.                     It is also worth noting that we are a civil regulator. Where concerns are raised with us that indicate the potential for criminal wrongdoing, then we will refer to criminal authorities and may need to pause our activities whilst we await the outcome. Once any criminal investigations have been concluded, we will resume dealing with remaining matters of charity governance. This arrangement is logical and is again one we are well-experienced in operating, but it means some of our casework can appear long-running to parties who are invested in the outcome.

Accountability

16.                     The Commission has wide-ranging statutory objectives, as set out in paragraph 2 of this response. It is important to us to measure our effectiveness against these. However, some outcomes, such as public trust and confidence, are significantly impacted by factors outside of our direct control. Nonetheless, we work hard to develop intelligent impact measures to help assess the effects of our regulation.
17.                     These include independently conducted research to produce our strategic impact measures, which are published in our Annual Report each Summer. We have additionally published operational performance measures, which are focussed on being accountable for customer service. As well as our Annual Report, we also report on our performance at our Annual Public Meeting (which is required in statute). We are also subject to parliamentary scrutiny mechanisms, including being accountable to Committees such as PAC and DCMS Select Committee. Our Framework Document covers how we share information with Ministers appropriately to allow this to take place.

Skills, expertise and capacity

18.                     An important cornerstone of our 2024-2029 Strategy will be to deliver excellence in all our regulation. This includes building clear capability-based career pathways to provide high-quality training for all our colleagues, and a focus on continuous improvement.
19.                     In recent years, we have faced a challenging employment market for those with the rights skills to support our regulatory functions, something we believe is held in common with other regulators but is especially acute for those like the Commission that fall within Civil Service pay limits and that are taxpayer rather than levy-funded. This is an ongoing risk in which our Board takes a close interest.
20.                     This is all the more important where we are making increasingly robust use of our statutory powers in the public interest, in an environment where we face increased legal challenge. To maintain our strong success rate in justifying our outcomes within the legal framework, it is important that we can attract and retain high-calibre caseworkers, lawyers and accountants.
21.                     We consider ourselves to be an efficient regulator that punches above its weight, overseeing a very large and diverse sector of over 170,000 charities across England and Wales with a small headcount. Table One illustrates that this compares favourably to equivalent regimes.

[1] Figures taken from the published annual reports for 2020-21. The expenditure refers to total operating expenditure and headcount to the average headcount

22.                     In addition to our more complex work to prevent and respond to mismanagement or misconduct in charities, we also carry a high volume of permissions-based work, to approve certain activities by charities that are required under statute, and consider in excess of 8,000 applications to register a charity each year. In order to preserve public trust and confidence it is important that we retain sufficient capacity, resource and capability to respond to events which may put increased focus upon our activities safeguarding confidence in the charitable sector. Recent such events included the conflicts in the Middle East and Ukraine, and the effects of the coronavirus pandemic and cost of living challenges.

Conclusion

23.                     Ensuring that the remit of regulatory bodies is clear, and that they have sufficient independence from Government is critical to ensuring public trust and confidence in the outcomes they deliver. The Commission is clear, for the reasons set out above, that we are set up to deliver on our statutory objectives, and our new 2024-2029 Strategy, in part because we ensure that Independence is a core focus of our decision-making, policy engagement and governance structures. As a non-ministerial department we have an established, and well-functioning, relationship to our sponsor department in Government, and our functions and responsibilities are clear to charities. That is not to say that regulating in a diverse, complex and evolving sector is without challenges, particularly given that we regulate a large sector with very limited resource. We are continuously taking measures to evaluate the risk of emerging regulatory gaps, and to ensure we have the skills, capacity and expertise to deliver excellent regulatory outcomes for the sector. We welcome the Committee’s inquiry into this topic.

4 December 2023

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