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ECONOMICS LEGISLATION COMMITTEE
28/06/2010
Tax Laws Amendment (Public Benefit Test) Bill 2010

ACTING CHAIR —I welcome Mr David Locke and Ms Joanne Edwardes from the United Kingdom charities commission to today’s hearing. Before inviting you to make an opening statement, I would like to remind you that the privileges and protections of parliamentary privilege cannot extend to jurisdictions outside of Australia, so your evidence should be given knowing the limitations of the Australian Senate to protect you outside of the Australian jurisdiction. This is a public hearing, although the committee may agree to a request to give evidence in camera or may determine that certain evidence should be heard in camera. Would you like to make an opening statement?

Ms Edwardes —Yes. We are from the Charity Commission for England and Wales, and we have been invited to give evidence today and to talk about the public benefit test that we have in England and Wales. We are very grateful for the opportunity to make this submission. We are very interested to see this new piece of legislation that is being proposed. The public benefit test in England and Wales is something that has existed in our common law for many hundreds of years. It was only very recently, in 2006, that the UK parliament introduced the new Charities Act, which re-emphasised the need for all charitable organisations to have aims which are for the public benefit.

This followed a number of years in which the Charities Bill was debated in parliament, and there was a great deal of debate in parliament and also in the media and in the public about what ‘public benefit’ means. There was a lot of discussion about whether a public benefit statutory definition should be included in the Charities Act. In the end, parliament decided not to include a definition but to make provision for the Charity Commission of England and Wales, as the regulator, to issue guidance on what the public benefit test means in our law. This is what the Charity Commission has done, and we also have a statutory objective: to raise awareness and understanding of what that public benefit requirement means.

We issued our guidance in 2008, which was when the public benefit requirement as stated in the Charities Act came into being. Since that time, we have issued some supplementary guidance to further inform what that requirement means for charities in England and Wales. It is fair to say that it is quite a complicated piece of legislation in terms of what is in the common-law charity law. It does take quite a bit of explaining, but we have done that in our guidance and boiled it down to a number of key principles that charities have to meet. This applies to all charities, regardless of what charitable purpose they have.

One of the other significant things that the Charities Act did was it removed something in law which was called a presumption of public benefit. This was where charities that were concerned with the relief of poverty or the advancement of education or the advancement of religion were previously presumed to be for the public benefit unless there was some evidence to the contrary. In the Charities Act that presumption was removed in the common law. This means that the public benefit requirement is now the same for all charities, regardless of their purposes. That was the only key change, really, in terms of the public benefit requirement itself. We have applied that public benefit requirement to some individual charities just to illustrate what that requirement looks like if it is played out in the context of different purposes, and that includes charities for the advancement of religion and some fee-charging residential care homes and fee-charging independent schools. We have published the results of those on our website, along with all our guidance.

So it is something that has been with us for a long time. Certainly charities in England and Wales are used to having to demonstrate public benefit. Greater emphasis is now on it and there is greater clarity from our guidance about what that requirement means in England and Wales. If there are any questions about our test or how we have applied it we would be happy to answer them.

ACTING CHAIR —Thank you very much. We will be asking you some questions.

Senator XENOPHON —I have a preliminary question. In essence are you saying that, as a result of the 2006 legislation, there is no longer a presumption of public benefit? In other words, is it almost a reverse onus in the sense that previously the common-law position was that a public benefit was presumed and you would need to show evidence to the contrary but now you need to show in a positive sense a public benefit before the charitable status supplies?

Mr Locke —The position is that, on registration, we would always look at the issues of private benefit and public benefit. We did this prior to the introduction of the 2006 act; however, if the charity was, for example, for the advancement of religion or the relief of poverty or the advancement of education, there would be a presumption that it was for the public benefit. So in effect, on registration, if there was evidence of private benefit or significant private benefit then that may be such as to reverse the presumption and we would ask further questions. So the test has always been there, but the assumption has been that organisations furthering these purposes would probably be for the public benefit and we would be looking to see whether there were any factors on registration that indicated otherwise that would, in effect, reverse that presumption.

The position now is that, as there is a level playing field and there is no presumption in respect of any of the charitable purposes, we will ask the same sorts of questions on registration regarding the nature of the organisation. We will ask each organisation to establish how it furthers the public benefit test in accordance with our guidance.

Senator XENOPHON —If an organisation has obtained registration but there are subsequently complaints about that organisation in terms of causing harm to its followers, or if its behaviour at a systemic level appears not to be in the nature of public benefit, do you have the power, once registration is given, to either revoke or question that registration?

Mr Locke —Yes, we do. We have a number of powers of regulatory intervention that are contained in the Charities Act. We have a power to open statutory inquiries into organisations if we consider that there are significant reasons for doing so. We will look at the question of public benefit if concerns are raised with us that indicate that the organisation is perhaps not charitable. If concerns are raised with us about any significant harm or detriment, then we will look at issues of public benefit in that context.

Also, we will look at issues of public benefit if, for example, an organisation wishes to change its charitable purposes in the future, so that would be another situation where we would engage in that way. Certainly if people were making representations to us that there was significant detriment or harm or that an organisation was not actually established as a charity for the public benefit, then we would have the power to look at that.

Senator CAMERON —Ms Edwardes, the Australian Catholic Bishops Conference have provided a submission to the committee where they argue that the public benefit test is problematic. This has been a recurrent argument from submitters to this inquiry, that the public benefit test is problematic or deeply problematic. Was that similar argument put in the UK?

Ms Edwardes —There was certainly a great deal of concern voiced, particularly by religious organisations, at the time that the public benefit test provisions in the act were being discussed and also when we widely consulted on our guidance. We consulted on our general guidance on public benefit, which says what the general principles are in law. We also produced some supplementary guidance specifically for religious organisations, because they were concerned about it, and also because the law had changed in respect of the public benefit test as the presumption had been removed. We did have a very wide-ranging discussion with them. We had a series of in-depth workshops held with religious organisations, and throughout that they did voice those sorts of concerns. They said it was very difficult for religious organisations to demonstrate benefit as it was an intangible kind of a benefit that was hard to quantify, hard to measure and hard to describe. What we did in our guidance and in all our discussions was help them find a way of articulating what the benefits of religion can be and how they can be demonstrated. Certainly, as a consequence of all of that, once our guidance was agreed and published, there were much fewer concerns from religious organisations about how they would meet this difficult test. We recently had a workshop with wide-ranging representatives of all sorts of religious organisations and in fact many of them have been saying that they found it helpful because it had helped them to find a way to articulate what they do, which shows how they meet this public benefit requirement. This was also supported by some of the individual public benefit assessments that we did on four religious organisations. We did this to demonstrate how these principles play out if you look at an individual charity. We looked at different types of religion and different types of ways of advancing religion and in all those cases the four that we assessed clearly demonstrated public benefit and we were able to show in what ways they did that. The reports that we published on those assessments have also helped strengthen this idea that it is a test that religious organisations can meet and can meet well.

Senator CAMERON —One of the things I noticed on your website is that you conducted an analysis of public benefit and the advancement of moral or ethical belief systems and that a consultation took place. Is that correct?

Ms Edwardes —Yes, it is correct. We did this partly in response to some requests that came through during the debate in parliament. There was a lot of discussion about the descriptions of purposes that were included in the act and of things that support the recognition of charitable purposes. There was a debate on whether the one on the advancement of religion should refer to other sorts of belief systems, so whether it should be the advancement of religion or belief. That was very widely debated in parliament. In the end it was decided that ‘religion’ meant something very specifically in charity law and they wished to keep it distinct.

But, of course, other sorts of non-religious, if you like, belief systems can also be charitable but under a different heading of ‘charity’—and that is the advancement of moral and ethical beliefs. We undertook to produce separate guidance for those sorts of belief systems. However, the people who responded to that consultation felt that the guidance that we produced did not quite achieve what they would like it to have achieved. It is quite a difficult area of charity law. There is very little charity law to explain what this specific area means and covers. Trying to define something almost by reference to what it is not—that is, nonreligious—is not really very helpful. It is difficult to describe it in the positive and say what it is. We attempted to do that and had consultation. The response was actually it was not very helpful in the end, so we withdrew the draft guidance that we had prepared and we deal with any questions that arise in the context of individual cases.

Senator CAMERON —Do you still rely on the extensive case law that has been built up over 400 years when you look at the public benefit test?

Ms Edwardes —Yes, we do. In fact, this was retained in the Charities Act 2006. The Charities Act clearly says that the public benefit requirement is still what it means in the common law except for the removal of the presumption of public benefit.

Senator CAMERON —What is the situation now with some of the main religions? Are they comfortable? Are there still concerns about the operation of the charity commission? How has that worked through?

Ms Edwardes —Our experience recently seems to be that many of the organisations that had been concerned all the way along were no longer expressing their concerns to us, so it would appear there is much more reassurance, particularly after we did the public benefit assessments and published those reports. The guidance itself was very well received when we published it and that did seem to address a lot of the concerns that had initially been raised.

There was a lot of misunderstanding about what the public benefit requirement meant for religious organisations and in particular there was concern that there was a secularising sort of agenda behind it and it was trying to force religious charities down advancing more secular purposes. We did an awful lot to reassure religious organisations that that was not the case. We think actually now that our guidance and the public benefit assessments we have done have given a lot of reassurance to those organisations and we are no longer receiving the sorts of concerns about it that we did at the start.

Mr Locke —As a consequence of the Charities Act 2006, a number of charities that were formerly exempted from having to register with us had an obligation to subsequently register. In the course of the last 18 months we have actually registered just over 2,500 formerly exempted charities, many of which were faith based, many of which were Anglican churches and congregations. The feedback we have had from those organisations that have gone through the registration process has been on the whole positive. They found it helpful in terms of looking at the governance of the organisation and also rearticulating what they are established for and how they help their communities. On the whole I think the feedback we are getting is fairly positive in this regard.

Senator CAMERON —Because that is the other argument—that there is a substantial additional burden placed on charities, and I would then assume religious organisations, by the operation of a charities commission. Has that been a refrain you have heard in the UK?

Mr Locke —There is concern raised by the charity sector about the level of regulation that they are subject to, but all the research that we and other organisations have undertaken does not indicate that the charity commission is part of that problem, really. It tends to be when you are looking at dealing with the inland revenue with regard to Gift Aid, or issues are raised regarding health and safety and other forms of regulation that affect charitable organisations. On the whole, the feedback from the research that we have undertaken indicates that people think that the regulatory balance is about right with regard to charity law and the charity commission.

Our approach to regulation is very much one of enabling and supporting the sector and actually recognising that, as in Australia, much of the charity sector is made up of very small, community based organisations run by volunteers with very limited capacity. So it is a question of proportionality in terms of your expectations of them. Certainly, the guidance that we have given to organisations with regard to the issue of public benefit is that that sort of proportionality also stands. So, for very small organisations, we are not expecting reams of reporting regarding public benefit; simply a few statements that articulate how they are established for the public benefit will suffice. But if you are looking at organisations that are much larger, then our expectations are much greater in terms of what they should be reporting to the public regarding their activities and how they are established for the public benefit. So we think proportionality is very much part of that.

Senator CAMERON —Do you have any examples of where a religion has not been classified as a charity or registered?

Ms Edwardes —We have. In 1999, the charity commission received an application from the Church of Scientology (England and Wales), and the report of our decision—which was to not register the organisation as a charity—a very detailed decision that we published at that time, is still on our website. In that context, when we look at any charity for the advancement of religion we look at two key things. We look, first of all, to see whether it satisfies the charity law definition of what is a religion. There are certain key criteria that religious organisations have to meet. If they do satisfy those criteria, we then look to see whether the aims, to advance the religion, are being advanced in a way that meets the public benefit requirement. In that particular decision in 1999 we decided not to register it, firstly because the organisation did not fully satisfy the criteria for religion in charity law here. We did also consider public benefit and, in that context, we concluded that it was not fully demonstrated.

Senator XENOPHON —I just want to ask a supplementary question before Senator Cameron goes back to his line of questioning. When the Church of Scientology of Australia, and also its New Zealand representatives, gave evidence earlier today, reference was made to this decision of 17 November 1999 of the charity commission. I do not want to misrepresent their position, but I think—and my colleagues will pull me up on this if I am wrong—there was some suggestion that, because of the 2006 law that was passed, that decision could be reviewed or would be subject to either review or a fresh approach. I think it was broadly in those terms—that they felt that the 2006 law could lead to a revisiting of that decision. What is your understanding? Has there been an application by the Church of Scientology to get tax-exempt status under the 2006 law, or is it now back to square one by virtue of the 2006 law? What is the status of the 1999 decision?

Ms Edwardes —No, that 1999 decision is not subject to review. At the time it was made, it could have been appealed but it was not. What would happen now? There is no appeal procedure now to go back and reopen that particular decision. Of course it would be open to any organisation such as the Church of Scientology to reapply for registration if it chose. We would obviously consider the application afresh and reach a view. If our view was that the organisation was still not charitable for the public benefit, it would have the opportunity to seek a review of that decision. That would go through our new charity tribunal or ultimately through the court. But basically that would be looking at a new application from the organisation rather than revisiting an old decision. That decision was made on the basis of the information provided to us at that time, which was some years ago.

Mr Locke —To my knowledge we have not received any application from the Church of Scientology in England and Wales. Our view is very much that the guidance that we have issued is a statement of the legal position. We do not see that as fundamentally changing what the legal position was in case law prior to the 2006 act. It is very much a restatement in modern terms of how the public benefit test applies. Whilst I do not want to prejudice any application from any party whatsoever we would obviously look at any fresh registration application afresh in the context of the legal framework and the guidance that we have issued. But we do not see the guidance that we have issued as fundamentally changing the law that applied in or prior to 1999.

Senator CAMERON —One of the issues I have raised with witnesses is the public benefit and how you deal with the issue of vicarious liability—that is, the actions of individuals employed by or who are part of a church. When do the actions of those individuals become so bad that there would be no public benefit?

Ms Edwardes —It is really a question of how the organisation itself manages those sorts of issues. Obviously, in any organisation things can arise and it is all about whether the trustees who deal with those situations had policies and procedures in place to mitigate risk of detriment or harm.

In our guidance on public benefit where we talk about detriment and harm, one factor that we say trustees should be aware of is keeping risks of detriment and harm to a minimum and managing them and dealing effectively with any issues when they arise. I think it would become a question of public benefit if there were evidence to show that there was something inherently unreasonable about the way in which the organisation was doing that. If it was endemic throughout the organisation and affected its ability to operate for the public benefit—that would be pretty extreme of course—that is when it would become an issue. It is about whether the aims of the organisation are for the public benefit—that is, the test we have here—but of course it has to operate for the public benefit. If there is evidence to show that it is not capable or will not operate for the public benefit—for example, if it does not have sufficient child protection policies in place to protect vulnerable beneficiaries—those are the things that we would look at very carefully. There would be significant concerns and it could affect the organisation’s ability to demonstrate that it satisfies the public benefit requirement.

Senator CAMERON —The New Zealand Charities Commission indicated earlier today that, for the first time, the New Zealand public now had an idea how much public funding was going to charities and that prior to the establishment of the commission it was guesswork. It seems to me that we in Australia are currently in that situation. I wonder whether the establishment of the UK Charity Commission has given the public an idea how much money is being spent on charities, what the benefits are and whether any analytical work is being done by the Charity Commission on that expenditure.

Mr Locke —Any organisation that is a charity in England and Wales that has an annual income in excess of £5,000, or about A$8½ thousand, has a legal obligation to register with us. We have 182,000 charities on the register and about 60,000 of those, in effect, have an income below that threshold but choose to stay on the register. Through our register we very much promote the accountability and transparency of charities. So we will record on there, for example, where a charity’s income comes from, where its expenditure goes to and what its assets are. Any member of the public can search on our website to see what the position is regarding any charities in their area or any national charities. Very much part of our regulatory model is to ensure that the public have trust and confidence in charities, and we think the accountability and transparency of the sector in terms of where its income comes from and where its expenditure goes is really a very central part of that.

In terms of our regulatory model, we think it is important that there is a fully accessible register of charities which enables the public to pull down data, such as you have talked about, on what is actually happening on both a macro and a micro level with charities. From my knowledge of the Australian regulatory framework, and certainly looking at what I have seen from the Productivity Commission review and the Henry report, the absence of a central register of charities seems to be an absence in terms of giving the public the sort of information that you are talking about.

Senator CAMERON —How many employees do you have in the Charity Commission?

Mr Locke —At the moment we have 460 employees. We are based over four sites. We receive just over £29 million per year in funding from the Treasury. We are a non-ministerial government department. We report to parliament for our work and report to the courts for our decision making, but we are funded directly from Treasury.

Senator CAMERON —Thank you.

ACTING CHAIR —Would you outline the impact on mainstream religions, such as the Catholic Church and the Anglican Church, that the establishment of your commission has had, if any.

Ms Edwardes —The Charity Commission has been in existence for a very long time. There is a very long tradition and history of charity law in England and Wales that governs religious organisations. By and large, we have had a good relationship with religious organisations, particularly the mainstream religious organisations. As David Locke was explaining earlier, a number of these have quite recently come under our regulatory control by dint of the need to register as a charity. Previously, they were excepted from that requirement and the Charities Act 2006 altered that position. Nevertheless, we have had a very longstanding relationship with mainstream religious organisations, and there are many who have successfully registered for many numbers of years. There are some new types of organisations also coming on to the register as well. We have certainly kept up to date with the changing nature of charities advancing religion, and so we have a very long standing relationship with them.

Mr Locke —As in Australia, much of the charitable activity and many of the charities we have in the UK were established by faith based organisations. Increasingly, over time, the sector has become part secularised, but it is only part secularised. As well as having faith-based organisations that are for the advancement of religion, many churches and faith based organisations provide a range of different community resources and community action in areas of social welfare and deprivation.

We have a similar but different composition to the sector in Australia. Whilst we recognise that there is a different heritage to many of these different charities, we think it is important that the regulatory framework we have applies equally and fairly and that we understand how organisations are structured and operate. But, on the whole, we have a very positive relationship with faith based charities in England and Wales.

ACTING CHAIR —There is a paragraph that I will read to you from the Australian Catholic Bishops Conference. It says:

The public benefit test used by the United Kingdom Charity Commission is problematic. Having reversed the presumption of public benefit it has sought to develop criteria to measure public benefit. For example, with respect to independent fee-paying schools, it assesses public benefit by reference to such matters as community access to facilities and availability of scholarships for those who have insufficient means to pay the fees. Such criteria are arbitrary: How much access? How many scholarships.

It goes on to say:

This approach is not consistent to with the original purpose of a public benefit requirement. This was not a qualifying test but a disqualifying one.

Would you comment on those words, please.

Ms Edwardes —Certainly it is fair to say that one of the greatest areas of discussion and debate around the public benefit requirements in England and Wales has been around the question of the effect of fees and charities charging fees for their services. This was an area where we produced some supplementary guidance specifically on public benefit and fee charging for this reason, because there was such a great deal of interest and concern. We have been at pains to explain, both in our general guidance and our supplementary guidance, how we have derived the principles in our guidance from the existing charity law. Our view is that these tests are not arbitrary. They are principles that are derived from case law. We have published a detailed analysis of the law that underpins all of our public benefit guidance to explain the case law that these principles come from. That includes the principles in relation to fee charging. We have explained that in some detail. Obviously there may be organisations that do not agree with our interpretation of the law, but we have explained where we believe it comes from in the law and have clearly spelt that out.

ACTING CHAIR —That has not been a problem for the mainstream religious organisations in the United Kingdom?

Ms Edwardes —Certainly not. The issue of fees was something that was considered. As it is a fundamental aspect of the public benefit requirement, it was considered for all the charities that we did the independent public benefit assessments on, which included four mainstream religious organisations. In those cases, fees were not an issue and did not cause any difficulties. All of those four organisations that we used for illustrative purposes clearly demonstrated that they met the requirements. In some cases, with regard to other sorts of charities that we reviewed, which were the residential care homes and independent fee-paying schools, a couple of those organisations did not fully satisfy that aspect of the public benefit requirement. We have been working with those organisations to see what they can do to change the way in which they operate so that they can satisfy that requirement. That is ongoing work that we are doing with those charities. But, even in those cases, it was not a case of us saying, ‘I am sorry, you are not charitable.’ It was a case of us saying, ‘This is what you need to do to satisfy the requirement,’ and we have worked closely with them so that they can do that.

Senator CAMERON —On this point, the New Zealand Charities Commission indicated that if someone was dissatisfied with a decision of the New Zealand Charities Commission they could appeal to the High Court. What is the appeal process against a decision of the UK charities commission?

Mr Locke —Most of the decisions that the Charity Commission for England and Wales makes are appealable to a charity tribunal which was established under the 2006 act as well. That was established to give a quick and cheap form of redress to individuals and organisations that were dissatisfied with a legal decision of the commission. So, for example, a decision not to register an organisation on the basis of public benefit would be appealable to the charity tribunal. Similarly, if the commission took any regulatory action against an organisation on the basis that it was not charitable then that regulatory action would be appealable to the charity tribunal. There is a subsequent right of appeal from the charity tribunal through to the court as well.

Senator CAMERON —Who sits on the charity tribunal and how do you determine who is appropriate to make those decisions?

Mr Locke —It is an independent tribunal that is established as part of the independent tribunal service in England and Wales. It has a president who is independently appointed through the Ministry of Justice. There are legal members as well as lay members of the tribunal. There are now two tiers to the tribunal, and it depends on the nature and complexity of the decision that is going forward. Most cases will go to the lower level. Some decisions will automatically go through to the higher level, which is normally a High Court judge or member of the judiciary who will sit in that capacity. But it is very much independent of the charity commission; it is not an appeals system that the commission has any responsibility for. It is part of an independent appeals service which reports to the Ministry of Justice in England and Wales.

ACTING CHAIR —In addition to Senator Cameron’s question, I ask whether you have an idea of what percentage of decisions are appealed beyond the tribunal.

Mr Locke —We have actually had a charity tribunal in place for about two years now. There have been a limited number of appeals that have gone through to the tribunal. I cannot recall the precise mount off the top of my head, but it is certainly single figures that we are talking about. It is a lot less than we had anticipated; our planning assumption had been that there would be about 50 decisions a year that would be going through to the tribunal, but there has been a lot less. To date we have not had any decisions that have gone to the tribunal on the issue of charitable status, although no doubt that will change. What we do have is an internal decision review process whereby, if an applicant is unhappy with our decision, they can seek an internal decision review process and they may decide to pursue that as an alternative to going directly through to the tribunal. We find that many charities and individuals do that.

Senator XENOPHON —We heard evidence earlier today from the Charities Commission of New Zealand. To what extent do you have a relationship with the Charities Commission of New Zealand? Have you given them any advice in their setup and are you familiar with the way they operate?

Mr Locke —We do have some links with the Charities Commission of New Zealand. There is an international regulators forum which has now met on three occasions. It meets on an annual basis. We have very much been a part of that engagement; for example, we hosted that in London last year, and the chief executive of the Charities Commission of New Zealand attended and spent some time in our offices as well as discussing with us issues of common regulatory concern. We also have an international program at the charity commission. It has been in operation since 2003-04, and in that context we work with a number of different governments and regulatory authorities across the world. So we do have some links with the New Zealand regulator on both a formal and an informal basis.

Senator XENOPHON —Are you in a position to say that, on the face of it, the New Zealand model is based on the UK model or at least has some similarities to the approach taken in the United Kingdom?

Mr Locke —I think there are a number of similarities between the New Zealand and the model that we have in England and Wales. Each jurisdiction inevitably when they look to set up a single regulator of charities will take what they think is best from other jurisdictions but also will adapt that to what is right for their particular context. There have been a number of countries where single regulators for charities have been established recently. In the United Kingdom, we have the regulator for Scotland, OSCR, which was established in 2005. More recently, we have had the regulator in the Northern Ireland being established. In Singapore, a new charity regulator has been established.

We are aware of a number of different models which take something from the English and Welsh model but also adapt it to according to what is right for their jurisdiction. So there are certainly similarities in the model. In New Zealand there is a central register of charities and they have regulatory powers of intervention as well as consensual powers of advice and support, which is very much similar to the regulatory model in England and Wales.

Senator XENOPHON —I would like to go to the issue of process. I know Senator Cameron has touched on that in terms of the appeal process with respect to decisions made. If there is a complaint about an existing charity, including a religious organisation, that has tax-free status, how is that brought to your attention? Can a member of the public complain? Is there a formal process? How does it actually work in the context of concerns being raised about the tax-free status of an organisation?

Mr Locke —Our role is very much in the context of the charitable status of an organisation. It is for the Inland Revenue to determine whether that is then subject to tax concessions, although ordinarily, if an organisation is registered as a charity in England and Wales, that goes a long way to satisfying the Inland Revenue in the ordinary course of affairs. Certainly a member of the public would contact the commission either through our website or through our contact centre, Charity Commission Direct, and raise concerns. A lot of concerns are raised with us about organisations—for example, about whether they are bona fide, how the organisation is conducting itself and whether there are any breaches of charity law. In that situation we would look at the information that has been provided. We have an assessment process whereby we would analyse what has been received and look at the evidence in support of that. We would then consider how it was appropriate to engage with the organisation.

Ms Edwardes —That is certainly the case, particularly with regard to public benefit. The same process really applies. If a member of the public were sufficiently concerned about whether an organisation satisfied the public benefit test they could contact the Charity Commission and we would consider it with any evidence, as we would any other form of complaint. People do write to us and say, ‘We don’t think this organisation satisfies public benefit,’ and it really depends on what their argument and evidence is as to whether we think there is sufficient cause for concern for us to then pursue that with the organisation and investigate it. We have a lot of guidance available about how people can make complaints to us about organisations and what we would do and how we would assess it on a risk and proportionality basis. Obviously we would have to look at what was being said.

Mr Locke —We do not have a program of going through the register and auditing organisations to see whether they comply with the public benefit test. We are simply not resourced in order to do that, nor do we think that is appropriate.

Our duty is very much to promote awareness and understanding of the operation of the public benefit requirement. The onus we see is very much upon trustees of organisations to ensure that they are considering the guidance and that they are ensuring that their organisation is operating for the public benefit and that they are reporting to the public how they do that. So we see very much that our engagement is about setting out the guidance and, as Joanne has said, setting out some assessments so that organisations can see how this operates in practice. But the obligation is very much then on trustees to ensure that they report to the public and that they are accountable to the public.

Senator XENOPHON —Just to go back a step, if an organisation loses its charitable status, which the Charity Commission has the power to do, that would, more likely than not, cause it difficulties with the Inland Revenue service in respect of their tax-free status?

Mr Locke —Yes, that is correct. The Inland Revenue would be in contact with us. We have very good relationships with the Inland Revenue. We would be exchanging information, no doubt, and they would contact the organisation directly.

Senator XENOPHON —In the absence of charitable status, it would be highly unlikely for that organisation to obtain tax-free status from the Inland Revenue?

Mr Locke —Normally if an organisation is over the income threshold there would be an expectation by the Inland Revenue that it has registered with us, because there is a legal requirement on it to do so. There are many organisations, of course, that have an income below the £5,000 threshold who would just separately register with the Inland Revenue for tax benefit but would not actually have come near us. But certainly if an organisation is over that threshold that is the case.

Senator XENOPHON —Can I just go back to the issues of process. If you received complaints about an organisation that has charitable status—and I am giving you some hypothetical examples here—for instance, allegations of bullying or coercion, or that former followers of this organisation or religion were charged exorbitant fees, or that there were issues of harassment and similar conduct, would you test those allegations? Would it be enough to trigger an inquiry if there were a number of allegations? Where would you go to? And if it appeared to be a few rogue elements in that organisation would you then seek some systemic changes to ensure it did not occur again?

Mr Locke —We would certainly want to assess the evidence that has been given to us and see whether that could be substantiated. That would be our first point of contact. We would ordinarily then contact the charity in question and raise the concerns that have been raised with us and see what comments they have. We would often want to see them at that stage and see whether there was any way we could get evidence from any third party.

We have published a risk and proportionality framework which governs how we engage in these sorts of compliance matters, as we refer to them. But certainly if the issues were very serious, if they raised issues of misconduct or mismanagement of the organisation or if the beneficiaries of the charity or the funds of the charity were at risk, then those are the sorts of factors that would lead us to a stronger regulatory engagement.

If we believe it is necessary we can open a statutory inquiry under our legislation. If we do so we then have a number of regulatory powers at our disposal. They include, for example, the power to require organisations to provide information, to freeze bank accounts, to suspend and remove trustees and to appoint an interim manager in the place of trustees. So there are a number of quite strong regulatory powers that we do have, but we can only exercise those if the statutory grounds are made out—which are very much around misconduct, mismanagement, harm to beneficiaries or loss of assets—and if we are satisfied it is proportionate to do so.

Our regulatory approach would very much be, in that situation, to sort out the problems in the organisation and to get the charity back on track. So we would very much be looking to the trustees, who are the people responsible for the management and administration of the charity, to see what steps they are taking to ensure this does not happen and that the people who benefit from the charity are fully protected. But if we are satisfied there is misconduct or mismanagement and if we are satisfied that that is the proportionate thing to do, then we can remove the trustees and we can take other strong regulatory action.

Ms Edwardes —Can I add that this issue about dealing with concerns about detriment and harm was something we looked at in some detail in relation to our guidance on charities for the advancement of religion. In an annex at the back of our guidance we give some examples of what might constitute detriment or harm. We look at a lot of those sorts of issues about whether there is any evidence about coercive tactics or any encouragement of violence or hatred, for example, towards individuals or anything like that or anything which unlawfully restricted someone’s freedom, or the way that the charities operate internationally which might give rise to conflict perhaps. So we do give some more detail about the sorts of instances we might regard as being detriment and harm. I think if there were significant evidence to suggest those sorts of detriment and harm might be occurring, it is likely to be something we would want to look into.

Senator XENOPHON —I am concerned about the time factor. That means that of necessity if there is an inquiry into the public benefit an organisation provides it could look at the issue of detriment in balancing whether the public benefit test is fulfilled. Is that what you are saying?

Ms Edwardes —Yes, the detriment and harm question is part of our public benefit test and one of our key principles of public benefit is that any benefits that might arise to the public must not be outweighed by any significant detriment or harm. That is a fundamental part of the public benefit test, so we would look at that anyway in the course of considering public benefit for any organisation.

Senator XENOPHON —Finally, earlier today we are from the Cult Information and Family Support group and I think one of the complaints was that when some people leave an organisation or religion they are cut off from their family members who remain in that religion. Is that something that would be considered in the context of detriment if there appears to be a systemic approach to cutting off family members, disconnecting from if some have left a particular organisation and other family members have remained in it, or don’t you delve into that sort of thing?

Ms Edwardes —I think it very much depends. We know we have had very conflicting stories about those kinds of suggestions of detriment and harm. We find it very difficult to get clear evidence either way. Obviously if there was very clear evidence that something was happening that was of that nature we might look at it. There are also difficult issues sometimes about individual choice. Sometimes there are concerns expressed by family members, for example, of people who have joined religious organisations that they do not see them anymore. It is difficult sometimes to establish whether that is a question of individual choice and people who are free and able to make those decisions or whether there is actual evidence of detriment and harm and people being prevented from speaking to family members. As I mentioned earlier, restricting a person’s freedom is one of those things that we specifically mention. Freedom is to come and go from the organisation, freedom to interact obviously with whoever somebody wishes. It is something that we specifically mentioned in our guidance as an aspect of what could be detriment and harm. I just know the difficulty sometimes is getting clear evidence around that.

Senator XENOPHON —Thank you, Ms Edwardes.

ACTING CHAIR —As there are no further questions, that concludes this segment. We thank you, Mr Locke and Ms Edwardes, for appearing on teleconference from the UK for this inquiry. Thank you very much indeed.

Committee adjourned at 7.04 pm