The Charity Commission is a mess. It's both a victim and exemplar of the Cameron government's deeply unserious approach to the voluntary sector. The plight of the sector's principal regulator is further evidence (as if we needed it) that the "big society" was never a proper policy but a whim.
In the next few weeks, a replacement for its lame-duck chief executive, Sam Younger, is to be interviewed (Younger leaves in August). Its Tory-appointed chair, William Shawcross, has to prove he is no mere hatchet man but can stand up to ministers over its depleted budget. Battered staff must convince auditors, and the public, that the tax privileges that come with charity registration are only awarded to deserving organisations.
The commission never really recovered after Labour's 2006 legislation left it having to fight to apply a proper test of public benefit for charities. Without political cover, it quickly gave up challenging "public" schools and private hospitals. Religion and churches are largely untouched. Its role has shrunk and, thanks to budget cuts, it struggles to do more than certify applicants for charitable status, hoping tribunals and the courts can mop up the hard cases.
But 2013 showed it can't even be trusted to do that. The National Audit Office (NAO) found the commission had passed an outfit that was no more than a device to avoid tax. The auditors were horrified at the way the Cup Trust had been able to claim £46m in tax relief, despite the money it gave to good causes amounting to less than 1% of its turnover.
Why didn't antennae twitch when the Cup Trust's sole corporate trustee was a company registered in the British Virgin Islands? It was a "disaster", said Shawcross.
Further nasty surprises emerged from NAO studies of claims made by charities for Gift Aid, which increases the value of donations by allowing charities to reclaim tax on them. The tax authorities had increased Gift Aid payments to individuals and companies from £130m in 2000 to nearly £1bn in 2012 but no one – especially the Charity Commission – had any evidence this generosity had stimulated an extra penny in giving.
The NAO was rightly miffed at Shawcross's admission he had not bothered to read previous NAO studies. Usually moderate, it crossly concluded that the commission was passive, slow and naively trusting; it had failed at every level.
If commission management cannot be turned around this year, maybe it has to go back to the drawing board. What is its role? The commission isn't a sector supervisor or advocate, and has no formal say on how charities operate. Yet last year Shawcross was shouting the odds on charity chief executives' pay and charities' involvement in public services – subjects where his views were coincidentally the same as the Tories'. At the same time, he and the commission were conspicuously silent on coalition plans to restrict campaigning by charities.
So why not, as in Scotland, treat charities as ways of adjusting tax and let HM Revenue & Customs decide who gets to register? The government commissioned the Tory peer Lord Hodgson to review Labour's 2006 charity legislation and he concluded that at least registration should be a single process jointly for HMRC and the commission. (Hodgson also recommended charities should have to pay to register – hardly conducive to big society dynamism.)
The question posed by Margaret Hodge, chair of the Commons public accounts committee, lingers in the air: why persist with a regulator that doesn't regulate? Writers of election manifestos for 2015 are bound to have the voluntary sector in their sights. One option is replacing the Charity Commission with a promotional body akin to the Labour-era Capacitybuilders. But that still leaves open the role of assuring the public that donations and tax relief are going to worthy causes.