http://www.ncl.ac.uk/~nlawwww/1996/issue2/dunn2.html
[1996] 2 Web JCLI  Words 6,243
Charity law - a political scandal?
Alison Dunn
Newcastle Law School
Copyright  1996 Alison Dunn. 
First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

Summary
The extent to which charities may pursue political activities, and political campaigning is a contentious issue. Whilst Parliament has steadfastly refused to embrace political aims as charitable purposes, charities are nevertheless permitted to undertake a degree of political activity. In order to assist charity trustees to remain within the law, the Charity Commission has updated its guidelines on the types of political activity and political campaigning that charities may pursue, and the penalties involved for breach. Whilst advice in this uncertain area is to be welcomed, the Charity Commission guidelines have limitations. These limitations reflect problems in charity law, an area that is ripe for reform. This article examines the guidelines, their limitations, and argues for greater clarification in the area.

Contents
Introduction
The 1995 Charity Commission Guidelines
Two useful developments
Causes for concern?
Reform
Bibliography
Footnotes

Introduction
In 1995 the Charity Commission updated its guidelines concerning the involvement of charities in the political sphere. The guidelines, published as 'Political Activities and Campaigning by Charities' (leaflet CC9), replace a set previously issued by the Commission in 1994. They cover a range of situations straddling the sphere of political activity and political campaigning, providing charities with advice, inter alia, upon influencing public opinion; supporting, opposing or promoting legislation; commenting on public issues; providing information; seeking support for government grants, and concluding with an examination of penalties. The stated aims of the guidelines are threefold: in the context of political involvement they aim to assist trustees of charities to remain within the law; secondly, to outline what actions the Charity Commission will take if trustees stray beyond the law; and, finally, to provide reassurance - effectively a safeguard - for those trustees who adhere to the guidelines (Preface, p 2). 
The rationale for restricting charities from engaging in political activities lies in the notion that a political purpose fails to satisfy the requirement of public benefit, an essential qualifier for a purpose to be charitable. This is due in part to the wide diversity in political tenets, the need for the judiciary to remain politically neutral, and, as Lord Parker stated in Bowman v Secular Society Ltd [1917] AC 406 at 442, "because the Court has no means of judging whether a proposed change in the law will or will not be for the public benefit". So, for example, charities whose purposes have been to support a political party, or reform a particular law, have been held to be political and not charitable. However, charities may engage in political activity where that activity is subsidiary to the principal purpose of the charity, for example see Re Koeppler's Will Trusts. The practical dividing line between a political purpose and a political activity ancillary to a charitable purpose, however, remains largely unclear. As Parliament has steadfastly refused to either incorporate political purposes into charitable trusts, or indeed provide any form of clarification upon the issue, the position of charity trustees precariously attempting to walk the tightrope between what is and is not permitted remains. In the context of providing support for trustees, the updated guidelines issued by the Charity Commission are invaluable in their attempt to clarify an unacceptably uncertain area.
The 1995 Charity Commission Guidelines
Under the 1995 Charity Commission guidelines, charities are given a fairly wide ambit to enter into the political sphere. Whilst they cannot be political organisations and cannot support a particular political party, the guidelines stress that they may nevertheless be involved in political processes and political activation, with the caveat that such activities must be subsidiary to, and in furtherance of, their principal charitable purposes (para 7).
According to the Commission, a political activity is acceptable if :
"there is a reasonable expectation that the activity concerned will further the stated purposes of the charity, and so benefit its beneficiaries, to an extent justified by the resources devoted to the activity; the activity is within the powers which the trustees have to achieve those purposes; the activity is consistent with [the] guidelines; [and] the views expressed [by the charity] are based on a well-founded and reasoned case and are expressed in a responsible way" (para 12). 
This embracing statement is elaborated in greater detail in paragraphs 15-62 of the guidelines. To take a few examples, a charity may influence government and public opinion, though it should only do so through accurate, well founded and reasoned argument based upon research or experience, and then only upon a matter directly related to the charity's purpose or the charitable sector as a whole (para 23). Additionally, a charity may comment upon changes in the law or government policy (para 33), and advocate or oppose such change (para 34). Whilst a charity cannot support a political party, it may nevertheless have a political view and advocate particular political solutions, providing it makes it clear that its views are independent of any political party (paras 39, 40). Charities may organise and present petitions to the Houses of Parliament or local government (para 26), and in a well-received change from the previous guidelines, a charity may both inform its supporters or the public how Members of Parliament have voted on particular issues, and provide them with material (such as the previously banned pre-printed postcards) to send to Members of Parliament to express the charity's and the supporters' viewpoint on a given political issue (paras 24, 25).

In carrying out the above a charity may not, inter alia, participate in party political demonstrations (para 28); attempt to influence government or public opinion through inaccurate or distorted data (para 27); invite either its members or the public to support its position without providing them with sufficient information (para 31); overstep the boundary between education and propaganda (para 32); persuade the public to vote for or against a particular candidate or political party (para 49); or undertake research with another body where it is clear that the latter's intention is to use the research for party political or propagandist purposes (para 53).

The penalties for breaching the restrictions against political activities are elaborated in the final section of the guidelines (paras 56-60). They emphasise that a breach will amount to a misapplication of charity funds, and could, for example, lead to withdrawal of taxation relief. Where a breach is suspected, the Commission will first seek an explanation from the charity. If that explanation is unsatisfactory, the Commission will use their discretion in imposing a suitable penalty. Depending upon the circumstances, the Commission may purely provide the charity trustees with advice, or, at the other end of the scale, it may initiate formal proceedings to recover the misapplied funds and restrict the charity from further political activities (para 58). It is unlikely that a breach of the restrictions on political activities would cause the Charity Commission to remove the charity from the Charities' Register. However, any charity seeking to exploit this detail should beware of the ultimate consequences, for as paragraph 60 of the guidelines states:
"If...the trustees could argue successfully that the express purposes of the institution were wide enough to cover impermissible political activities, then the question of whether the organisation was established for exclusively charitable purposes would arise, and could lead to its removal from the Register of Charities." 
Interestingly, as well as the more specific penalties, the guidelines further stress the wider risks for a charity, and indeed for the sector as a whole, of embarking upon unacceptable political activities and misapplying funds. That wider danger is the loss of public support - be it financial or moral (para 56). Whilst this may be a risk that some charities are willing to take in furtherance of their aims or principles, it remains clear that in the present climate of declining donations and donor scepticism on the efficiency and efficacy of the sector, this could prove in fact to be the most compelling of  'penalties'.
Two useful developments
One introduction in the 1995 guidelines on political activity is the inclusion of objective assessment criteria. This is a change from the subjective standards that had been in place in the 1994 Charity Commission guidelines. Under paragraphs 36, 37 and 39, a charity is advised that it may support, oppose or promote legislation, or advocate political solutions "which can reasonably be expected" to achieve, hinder or further its charitable purpose. The change to this objective standard increases certainty, and is in line with the trend towards more stringent regulation of charitable behaviour, in the sense that it requires an internal check to trustee activities through consideration of a notional common standard rather than by individual rationalisation. This reinforces the need for charities to have in place a procedure for accountability in order to evaluate their political activities, the importance of which is a point forcibly made in the guidelines (para 14). Regular evaluation by charities of trustee activity is, of course, advantageous, and objective standards by which to assess such activities should provide certainty where trustees are in doubt.
On a topical note, the 1995 guidelines include advice on the political use by charities of emotive advertising material. Enormous pressures have been put upon charities' fund-raising in recent years. Despite moves to introduce more and easier methods of planned donations, charities have seen their income diminish in real terms. This fall has been exacerbated by the introduction of the National Lottery. For example, the National Council for Voluntary Organisations (NCVO) has estimated that during the first year of operation of the Lottery, £276 million of charitable donations would be lost (NCVO 1995). (It does not appear that this fall in donations will be offset by grants made to charities by the National Lottery Charities Board. An overall loss is therefore expected.) Whilst the long term effects of the latter cannot as yet be predicted, charities have been forced to reassess traditional modes of fund-raising. Some charities have become more aggressive in their advertising techniques in order to counter the decrease in donations. As a result, the use of emotive material to highlight issues and engage the compassion of the public is becoming increasingly common. In terms of campaigning and of seeking to influence government and public opinion, the Charity Commission guidelines emphasise the need for "well-founded, reasoned argument based on research or direct experience" (para 23). Whilst the use of emotivity is not ruled out, the circumstances in which it may be used are circumscribed: paragraph 20 of the guidelines states: 
"Provided all other requirements are met, material produced in support of a campaign may have emotional content. Indeed, the Commission accepts that the areas in which many charities work it is difficult to avoid engaging the emotions of the public. But it would be unacceptable (except where the nature of the medium makes it impracticable to set out the basis of the charity's position) for a charity to seek to persuade government or the public on the basis of material which was merely emotive." (emphasis added - see also para 30)
Further, if the medium used to advertise prohibits factual support for a charity's position, they must nevertheless be able to provide evidence of that factual support if questioned. The explicit inclusion by the Charity Commission of guidelines upon emotive material is a welcome move forward, and may combat the rise in 'shock' advertising techniques increasing prevalent in print and other forms of advertising medium. In some circumstances regulation already occurs through the operation of the Advertising Standards Authority (ASA), who touched on the use of emotive material in advertising by charities in a recent report. In upholding complaints against a cinema advertisement of a particular charity, the ASA acknowledged the financial pressures placed upon charities, but cautioned against the wide effects of claims that did not "stand up to scrutiny". The wider effects highlighted by the ASA mirror those emphasised by the Charity Commission, that is, the penalty of loss of public support. The ASA commented (ASA 1995, p 1):
"Overstepping the line between presenting a possibly distressing, but accurate, picture of their cause and misinforming people about an issue by exaggerating or stretching the truth, exploits the trust that the public have in charities and certain pressure groups." (emphasis added)
However, whilst tighter regulation of the use of emotive material is foreseen, the Charity Commission provide little indication in their guidelines as to the precise dividing line between what is an acceptable or non-acceptable use of such material. The dividing line is important if, for example, the powerful and intrusive nature of audio and audio-visual advertisements is not to be abused.
Causes for concern?
It is in this lack of precision upon acceptable behaviour that the Charity Commission's guidelines disappoint. In certain instances, unequivocal statements and explanations are provided by the Charity Commission in the guidelines: for example, in explaining that a charity may advance education, but must not overstep the boundary separating education from propaganda, the distinction between the two is explained (para 32); so too is the notion of an ancillary purpose (para 9). Yet, despite the cogency these guidelines have in an abstract context, when assessed in a practical environment their immediate boundaries become less obvious. The Commission acknowledge that "the dividing line between proper debate in the public arena and improper political activity is a difficult one to judge" (para 8). Even so, the use by the guidelines of concepts such as 'acceptability' and vague advice that charities should express their views "with a proper sense of proportion" (para 10) can cause confusion. The failure to clarify these terms does not aid the guidelines to attain the first of their stated aims, to assist trustees to remain within the law. The lack of explanation of the law, however, is not so much symptomatic of the guidelines as it is of a lack of clarity in the charity arena as a whole. A 1989 White Paper which partly examined political activities by charities, freely admitted (in para 2.38) that "the precise extent to which a charity may properly seek to influence the Government and public attitudes is a difficult question". It is just unfortunate that the question remains as difficult with the aid of the Charity Commission's guidelines on political activity and campaigning, as without. 
On a point associated with the demarcation of boundaries, it should be noted that whilst the Charity Commission give an indirect interpretation of political activity through identifying various forms of permissible and non-permissible actions by charities, the guidelines do not directly ascertain the breadth of the term 'political'. Reference is made within the guidelines (see paras 5, 6 and the Annex) to established case law, which indicate that the term 'political' is to be construed widely, though it has limits. This was recognised by Slade LJ in McGovern v Attorney General [1982] Ch 321, at 340, when he stated:
"Trusts for political purposes...include (inter alia) trusts of which a direct and principal purpose is either - (i) to further the interests of a particular political party, or (ii) to procure changes in the laws of this country, or (iii) to procure changes in the laws of a foreign country, or (iv) to procure a reversal of government policy or of particular decisions of governmental authorities in this country, or (v) to procure a reversal of government policy or of particular decisions of governmental authorities in a foreign country."
The construction of the term was recently considered by Kennedy LJ and McCullough J in the case of R v Radio Authority, ex parte Bull [1995] 4 All ER 481. Bull concerned an application by the British Section of Amnesty International for judicial review of a decision made by the Radio Authority (the body which regulates commercial radio) in which the Radio Authority refused to broadcast an advertisement on behalf of Amnesty. Under the Broadcasting Act 1990, s 92(2)(a) the Radio Authority is required not to broadcast an advertisement:
"(i)...by or on behalf of any body whose objects are wholly or mainly of a political nature, (ii) an advertisement which is directed towards any political end."
According to Rule 8(a) of the Radio Authority Code of Advertising Standards:
"The term 'political' here is used in a wider sense of 'Party Political'. The prohibition precludes, for example, issue campaigning for the purposes of influencing legislation or executive action by local or national government."
One of the questions before the Court was whether the Radio Authority had correctly interpreted the term 'political' in the Broadcasting Act. In construing the term and interpreting s 92(2)(a) of the Act, the Court found that 'political' as a concept was a wide one - going beyond the notion of party politics, and encompassing any activity which transcended into government policy. In reaching this conclusion the Court sought assistance from Slade LJ in McGovern, and also drew support from the House of Lords in Tzu-Tsai Cheng v Governor of Pentonville Prison [1973] AC 931, where Lord Diplock stated (at 945):
"...politics are about government. "Political" as descriptive of an object to be achieved must, in my view, be confined to the object of overthrowing or changing the government of a state or inducing it to change its policy."
However, whereas McGovern and Tzu-Tsai Cheng seemed content to leave political activities at procuring change in policy, McCullough J in Bull seemed to cast the net wider - an activity would be political if it pertained to government policy. Whilst McCullough J stated (at p 500) that the fact something could be achieved by legislation would not make it political, the point was added that:
"Once the matter has become the subject of government policy, or once the need for legislation about it is advocated, particularly if the matter has become contentious, then, as it seems to me, it is open...to treat it as 'political'."
This construction could have potentially wide reaching consequences, not least because a majority of charities, whilst not procuring change in government policy, nevertheless are concerned with politically sensitive areas which pertain to government policy, such as housing, health, education and welfare. If one takes McCullough J's view of 'political' to its natural limits, it could embrace all those activities falling short of procuring a change in policy, the everyday work of charities. Admittedly, Bull was not a case concerning construction of the term 'political' in the charity context, it concerned judicial review and interpretation of the Broadcasting Act. Nevertheless its view of the extent of the term is significant. Future editions of the Charity Commission's guidelines would benefit from clarification upon the grey area of activities which pertain to government policy.
The explicit demarcation of acceptable and non-acceptable political or campaigning activity by charities in guidelines such as the ones published by the Charity Commission would, however, be resisted by many - the basis of that resistance following the same rationale that has prevented Parliament legislating in this area. In considering the issue of whether to embrace political purposes as legitimate charitable purposes, the 1989 White Paper ultimately opposed the making of such a recommendation, since legislation would "have the disadvantage of laying down inflexible rules instead of allowing the law to develop in the light of particular cases which may present features which cannot now be foreseen" (para 2.44). But it is a paradox that the preservation of flexibility highlighted in the White Paper, and which has so dominated the thrust of charity law, can actually exist as both the area's strength and its weakness. On the positive side, charities, in the main, act in response to social need, and thus must retain enough flexibility to mirror the changes in society, social expectations and social attitudes. In this context, the inflexibility of specific legislation (or guidelines) would hinder the effectiveness of charities. Here, the quick and unfettered ability to respond to change is a strength. Conversely, the attempt to preserve the pliancy and diversity of charities from the impediment of rigid legislation (or guidelines) can be stifling, especially in the context of political activity. For example, to stave off strict regulation an emphasis is placed in the guidelines upon charities to self-regulate their political activities (para 14). Yet, without unambiguous guidelines concerning the boundaries of acceptable political behaviour, self-regulation becomes difficult. In a climate of uncertainty, moreover, the threat of penalties for unlawful activity will tend to preclude participation in the political arena, which ultimately prevents the area from developing and changing. Here then, the preservation of diversity becomes the stick of restraint.
A second concern arising from the Charity Commission guidelines relates to the ability of smaller charities to influence government or public opinion. Paragraph 23 of the guidelines states that whilst charities may influence government or public opinion, they may only do so "through well-founded, reasoned argument based upon research or direct experience" (emphasis added). The requirement of accurate and justifiable argument is essential for informed debate. In a democratic society, so too is the ability for all voices to be heard. It has been stated that "The voice of charity can be the voice of conscience in a society where such voices are often drowned out", and smaller charities often represent the only outlet for those in society who are not accommodated by the large main stream charities, but who are vulnerable and require representation nevertheless. The main pressure that smaller charities are under is a strain upon resources. They have been hit hard by falling donations, and whilst some may benefit from the grants made by the National Lottery Charities Board, those grants may not be received in time to offset the fall in donations. In this climate, the requirement for charities to undertake research to support argument, though laudable, is likely to be beyond their resources. Further, the use of charity funds to undertake research must in any event be within a charity's ambit, and must be for the public benefit. (The Charity Commission is currently taking consultation on the issue of research.) Additionally, those with insufficient direct experience to support their argument will have a diminishing opportunity to present their views, and participate in political activities. This could prove to be regrettable. One of the chief characteristics of current charity law is its great diversity. The legal structure and the looseness of the categories of charitable status evident from Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, the Preamble of the 1601 Statute of Charitable Uses, and up to four hundred years of case law, has enabled a myriad of charities with a myriad of purposes to come into existence. Despite criticisms in some quarters as to the effectiveness of a huge body of organisations enjoying charitable status, overall their diversity enriches society and enables the spirit of philanthropy to be accommodated alongside the wide relief of vulnerability. A threat to this diversity - be it via the extinction of individual charities through financial pressure, or effective exile from the political framework because of a lack of resources to fund research - is a threat both to the spirit of the area as a whole, and to adequate representation for vulnerable individuals in particular.
One absence from the 1995 guidelines is the form of any practical advice to trustees of those charities who have entered into contracts with the government to provide state services, such as healthcare. The growth in a 'contract culture' over recent years raises many concerns (see Knight 1993, ch 3), including how far humanitarian ideals are being subjugated in order to relieve government burdens. In the political context, however, it raises the issue of how far charities have created a conflict of interest with their - albeit limited - political freedom by effectively compromising their independence. Whilst the Government have stated that they "seek a free, vigorous and creative partnership with the voluntary sector" (H M Government 1992), the price charities may be forced to pay for this 'partnership' could possibly be the forfeiture of their ability to undertake a degree of political activity in order to safeguard their contract. Admittedly, this type of political issue is more oblique than those considered by the Charity Commission in its guidelines, but nevertheless it is an example of an additional practical issue facing charities when they consider whether or not to campaign.
Reform
The 1989 White Paper stated, at paragraph 2.41, that:
"The safeguards which the law provides are indispensable to prevent what are essentially political factions or pressure groups from assuming the guise of charity. It is vital in the longer term interests of the public and charities alike, that political and charitable purposes should remain distinct." 
In an attempt to prevent fringe groups or extreme political activists gaining a degree of legitimacy through charitable status (and hence from receiving public subsidisation through generous taxation exemptions), the current law has overlooked the full potential charities have to act for the common good. If the Government is seeking a successful union with the charitable and voluntary sector it will need to take on board the political aspects of charities, and consider the role charities could usefully play in a social and political order. They have the experience. Charities and their legal structure were founded in an overtly political climate, and both have the competency to take on a political role. The Preamble to the 1601 Statute of Charitable Uses was reputedly enacted to quell possible social disturbance and formed part of a systematic and tight programme of Elizabethan social reform (see Holdsworth 1922, pp 396 ff). Further, the framework for charitable purposes enabled private philanthropy to be channelled into easing parochial burdens; be they the relief of the aged, the impotent and poor people, the education of orphans, or the maintenance of houses of correction. Charity has not shaken free from those origins and continues to exist in a political environment dealing with political issues, such as poverty or education. Given their lineage, and the unique position they occupy in society, charities have the singular ability to directly assess the efficiency and effectiveness of current Government policy or legislation, and upon the basis of that experience they have a valid contribution to make in the political arena. Charities may, of course, establish non-charitable bodies to take on a political role. But that non-charitable arm remains financially distinct from the main charity, and as a result it is not a feasible option for smaller organisations. In any event, separation is not a long term solution to the cut in freedom of speech.
In the context of trends in the sector as a whole, this is, moreover, a particularly judicious time for reform. The area is experiencing a challenging period, uncertain of its own identity and direction as it moves towards the third millennium. Cracks are surfacing in a legal structure principally designed for flexible operation, but which has increasingly to combat criticism and calls for tighter regulation. The particular timing of a number of recent reports on the sector calling for a reorganisation, a 'renaissance', have resulted in an intense focus on the charitable arena (see Mulgan & Landry 1995, p 8; Knight 1993). For example, whilst the financial advantages afforded charities via taxation exemptions have continually been questioned, those questions only appear now to be gathering any impetus. Additionally, donors and beneficiaries, disillusioned by a climate of corporate fraud, are demanding that charities too display a greater degree of accountability and business acumen. In the last twelve months moreover, the National Lottery has added the final touch, principally by placing pressure upon charitable donations as a consequence of a widespread public misconception concerning the precise proportion of each lottery stake siphoned off to the National Lottery Charities Board (currently only 5.6 pence in the pound). 
These diverse pressures have political consequences, and despite the wide range of activities identified by the Charity Commission in their guidelines as acceptable for a charity to pursue, many charities are nevertheless held back by current law from campaigning against Government policy. For some the political restrictions will not present too onerous a problem, though that position is not applicable to all, in particular, to those charities that deal with health or poverty and for whom current law and government policy directly impacts upon their work, and, ultimately, their effectiveness. Admittedly, effectively securing and implementing change on a political level will not be free from difficulty. There are many barriers to overcome. For example, one objection to political legitimisation has been the exploitation of donors (see the 1989 White Paper, para 2.41) who may find that their donations are being used to fund actions that are adverse to their own political principles. This is a valid objection. For charities that wish to pursue an active political function, full and accessible information as to their political stance and objectives should be freely available to donors, so that the latter have the opportunity to make up their own mind whether to donate. Another valid objection arises from R v Radio Authority, ex parte Bull. In a postscript to his judgement, Kennedy LJ stated, (at 496), that "it is worth recognising that something which may appear to be an unnecessary restriction upon a good cause could also usefully restrain something manifestly less worthy." It is implicit from this that safeguards will need to be built into the legal structure to prevent extreme fundamentalism prejudicing the common good. This will not be easy. But despite the barriers and the difficulties, the opportunities that currently present themselves for sensible revision need to be grasped. At the moment, charities exist in a form of political limbo. It is anomalous that many perform political functions, but do not have a clear and unequivocal political voice.
The Charity Commission guidelines highlighted above do not provide charities with that clear voice, and they do not resolve the anomalies in the law - nor should they, since such an embrace properly rests with Parliament. Nevertheless, the 1995 guidelines have significance. On a practical level, they are clearer and better organised than the ones they replace and provide essential support to charity trustees as they walk through the political minefield. On a more fundamental level the guidelines serve, albeit unconsciously, to highlight the need for reform, or at least for Parliament to provide clarification in the area. On a final note, whilst it may be said that "where there is no vision, the people perish" (Proverbs 29:18), in the context of charities, it should be added that in addition to vision, there also has to a be a clear opportunity for expression.
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