The big idea

Since the chancellor's announcements of public spending cuts in October 2010, an atmosphere of gloom has descended upon some parts of the charitable sector.

To an extent, that is understandable. The sector relies on government support for an estimated 36 per cent of its total annual income. The larger the charity, the more likely it is to receive government funding; some household name charities are among those most vulnerable to statutory cuts.

But the Charity Commission has been keen to remind charities and their advisers that while the coming years will be challenging, they are also likely to bring new opportunities. The government has put forward the idea of the Big Society, which includes a commitment to involving the voluntary sector more heavily in service delivery, encouraging greater local civic and community action and developing new models of achieving social benefit.

Charity has a long history of being innovative and the commission aims to positively work within the legal framework to support this. Registered charities are at the heart of civil society in England and Wales '“ they represent its backbone. So much of theimplementation of the Big Society is likely to involve charities. These new opportunities will be welcomed by the sector.

It is important that lawyers as trustees and legal advisers are also aware of opportunities, as well as possible areas of risk, so that they can prepare their charities effectively for participation in the new political landscape.

Promoting charities

A key element of the Big Society concept is a commitment to encouraging innovative forms of social action and engagement. That commitment is mirrored in the commission's own mission to encourage and promote the effectiveness of charities, and in our track record of championing legal and regulatory innovation. Lawyers working with people wishing to start up new charities in coming years and months will be especially interested in developments to the legal forms available to those wishing to register a charitable organisation.

In addition to existing forms '“ the trust, the unincorporated association, the company limited by guarantee '“ charities will, from next year, be able to register as a Charitable Incorporated Organisation (CIO). The CIO has been created in response to requests from the charitable sector for a new incorporated form which is not a company and so does not require the body to register with Companies House.

The regulations which complete the legal framework for the CIO are yet to be approved by parliament, but we anticipate that the new form will be available for charities to use from 1 April 2011. The commission's website provides more details about the pros and cons and will offer model documents in due course. Also, the Big Society aims to encourage more community engagement and activism, which could be beneficial to encouraging general support for charities. Promoting the voluntary sector is in fact a charitable purpose in its own right. The commission has developed guidance, available on our website, which sets out the legal framework for charities wishing to promote the voluntary sector.

At your service

The coming years are likely to see charities entering new areas of public service delivery. Charities considering taking up such opportunities will need to ensure they are able to fulfil any obligations they agree to at the cost at which they bid for the contract. Lawyers play an important role in helping charities ensure they do not bid for contracts at prices they later find they cannot afford.

We have often said that when it comes to public service delivery, charities should 'know their worth' '“ when looking for opportunities to deliver public services they should ensure they can afford to deliver on the terms agreed. Of course charities can only bid to provide services that are a way of furthering their purpose. For more guidance see 'Independence of Charities from the State' and the commission's decision on Wigan & Trafford Leisure Centres, both on the website.

Building trust

Some charities have reported a decrease in public donations, and, if this continues, as some believe it may, people may not feel that they can give to all the charities they once supported. They may become more discerning about who to give to, and our public trust and confidence research indicates how much importance the public put on how much money is spent directly on 'the cause'.

Trustees and their advisers will therefore need to focus greater energies on demonstrating the impact of their work '“ on explaining why their charity makes a difference. For many charities this is done through their annual report, or regular contacts with supporters, but being clear about the results of their work and the difference it makes to beneficiaries may encourage an increased sense of trust among the public and desire to 'invest' in the work of the sector.

Campaigning and political activity

One positive effect of increased civic participation for charities might be renewed interest in their local campaigns, initiatives and petitions. Charities might find it easier to make their campaigns a reality if people are more willing to engage with local issues.

Some charities might have concerns about the impact of changes to government policy on their beneficiaries, and may wish to campaign on those policies. This is of course legitimate, but it is important that trustees and advisers are familiar with our guidance on campaigning and political activity. The important principle for trustees to remember is that of independence and political impartiality.

Our guidance is clear on the forms of activity that are acceptable for charities, as well as being clear about what charities cannot do and should avoid the perception that they are doing, such as supporting a political party '“ which is of course unacceptable.

Strategic review

The commission itself will have to adapt to real-terms cuts to its budget of around a third over four years. In response to the cuts, we are conducting a strategic review of our role and activities to ensure we continue to serve as an effective and proportionate regulator.

The review will seek to establish what the key risks are facing the charitable sector and what role the commission should play in helping to mitigate those risks. The strategic review is likely to see the commission change considerably, and this will have implications for charities and their legal advisers.

As part of that review we have held a public consultation, which is open until mid-January. We are keen to hear from lawyers working with charities and encourage you to take part '“ you can find the consultation on the special blog site we've set up for the strategic review (https://charitycommission review.blogspot.com).

Ultimately, the Big Society project rests on a willingness on the part of individual citizens to take a more active role in their communities and in society. That, of course, includes members of the legal profession. There are a variety of ways in which lawyers can volunteer to help charities, including trusteeship and pro bono case work.

Copyright & permissions