Foundations of Charity Law in the New Welfare State
| Published date | 01 May 1999 |
| Author | Michael Chesterman |
| DOI | http://doi.org/10.1111/1468-2230.00210 |
| Date | 01 May 1999 |
THE
MODERN LAW REVIEW
Volume 62 No. 3May 1999
Foundations of Charity Law in the New Welfare State
Michael Chesterman*
A mission statement for charity law
This is something of a ‘back to basics’ paper about the peculiar blend of trusts law,
tax law and administrative law which we call the law of charities. In general terms,
my case is that even though the ‘new welfare state’ may have provided a very
different operating environment for charities, one in which both their significance
and their resources have seemingly increased, some basic problems remain in
charity law. In fact, the importance of solving these problems satisfactorily is
another thing that has increased on account of the arrival of new approaches to
welfare provision.
About twenty years ago, in the concluding section of my book, Charities, Trusts
and Social Welfare, I compiled what I fondly hoped was a cogent left-wing critique
of the general structure of English charity law.1This critique probably now looks
distinctly dated. Lodged within it, but not directly expressed, was a set of loosely-
formed ideas about what a satisfactory legal regime for charities should seek to
achieve. In outline, the set of ambitions, or ‘mission statement’, for charity law2
which I implicitly had in mind was as follows:
•to provide one or more legal structures (trust, company etc) whereby the
purposes envisaged by the altruistic originators of publicly beneficial, non-
profit-distributing enterprises can be formally laid down;
•to ensure that any processes in which these enterprises, or persons or bodies on
their behalf, engage with a view to obtaining funds from government bodies
and/or the private sector are carried out in accordance with appropriate
standards of honesty and efficiency;
ßThe Modern Law Review Limited 1999 (MLR 62:3, May). Published by Blackwell Publishers,
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* Faculty of Law, University of New South Wales, Sydney, Australia.
This paper was written for the Colloquium on Foundations of Charity, jointly organised by King’s College
London and the National Council for Voluntary Organisations in September 1998, and funded by the
Modern Law Review and the Economic and Social Research Council. Expert research assistance provided
by Angela Seow Wee Tan is gratefully acknowledged. I also owe thanks to the Law Foundation of New
South Wales for funding this research and to my colleague Philip Burgess for providing critical
commentary on a draft.
1 Michael Chesterman, Charities, Trusts and Social Welfare (London: Weidenfeld & Nicolson, 1979) chs
14–17.
2 The ‘basic characteristics’ suggested for charities (not charity law) by the Charity Commission in
Annex A to its Consultation Paper, Framework for the Review of the Register (Lon don: HMSO, 1998)
have some similarities to this ‘mission statement’ of mine. See too the Report of the Commission on the
Future of the Voluntary Sector, Meeting the Challenge of Change: Voluntary Action into the 21st
Century (London: HMSO, 1996) Part 3.
•to ensure that the persons in charge of enterprises of this nature apply their
funds and other assets towards fulfilment of their stated purposes, meeting
appropriate standards of honesty and efficiency and with some awareness of
the desirability of co-operating with other agencies in the same field of welfare
provision;
•to provide state support for such enterprises through fiscal privileges, so long
as they pursue purposes which can legitimately be expected to benefit a
significant group of people who are in need of welfare assistance, and thereby
bring about some redistribution of society’s resources from the rich to the
poor;
•to assure to such enterprises a significant measure of independence from state
welfare policy, in order that (a) public-spirited individuals will continue to be
motivated to establish and maintain them and (b) any potential which they may
have for creative and innovative contributions to welfare provision may be
beneficially exploited.
A commentary on my final chapter, published in Australia in 1991,3contained the
suggestion (with which I agree) that the broad ‘conundrum’ underlying my critique
was that of reconciling the ‘private ordering’ which takes place through the
creation and perpetuation of charitable enterprises with a number of significant
‘public interest’ considerations. These considerations include efficiency in
expenditure of welfare funds, recognition of a hierarchy of needs and co-
ordination of welfare activity. The commentary suggested (and again I agree) that
total, harmonious reconciliation between these private and public imperatives is
impossible, so some degree of compromise is unavoidable.
In this paper, written two decades later on the topic of ‘charity law in the new
welfare state’, what I would like to do is to discuss the extent (if any) to which
changes in English charity law and administration over the last twenty years have
pursued the fourth and fifth of these broad aims. These aims can be summarised as
‘promoting wealth redistribution through tax reliefs’ and ‘ensuring relative
autonomy’ respectively.
I recognise that to specify these two aims – particularly the first of them – as
appropriate for charity law may be a touch controversial. But it is my belief that in
the view of the changes in government welfare policy that are summed up in the
phrase ‘new welfare state’, it is even more important now than twenty years ago
that charity law should try to achieve them. Virtually every review of wealth
distribution in this age of economic rationalism identifies a widening gap between
rich and poor. If the institutions that we call charities are not consistently engaged
in seeking to narrow this gap, it is difficult to think of a reason why they should
deserve to be called ‘charities’.
As my contact with charity law and administration during the last twenty years
has almost entirely been in an Australian context, I will unashamedly draw on
Australian material when it seems useful.
I will start with a few brief comments on what the arrival of the ‘new welfare
state’ seems to have meant for charities.
3 Terry Carney and Peter Hanks, ‘Taxation Treatment for Charities: Distributional Consequences for the
Welfare State’ in Richard Krever and Gretchen Kewley (eds), Charities and Philanthropic
Organisations: Reforming the Tax Subsidy and Regulatory Regimes (Melbourne: Comparative Public
Policy Research Unit, Monash University and Australian Tax Research Foundation, 1991) 49, 69–71.
The Modern Law Review [Vol. 62
334 ßThe Modern Law Review Limited 1999
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