Institute of Economic Affairs warned over breach of charity law
In order to be registered as a charity, an organisation must be established under one of fourteen charitable purposes for the public benefit. The charity at the centre of this story, the Institute of Economic Affairs (the IEA) falls under the charitable aim of furthering education. It aims to ‘promote learning by means of research into economics and politics and to improve public understanding thereof.’ The IEA describes itself as 'the UK's original free-market think-tank’ and their aim is to ‘promote the intellectual case for a free economy, low taxes, freedom in education, health and welfare and lower levels of regulation.’ They further their charitable objectives by commissioning and undertaking research, holding conferences, lectures, seminars and events, and through a programme of student and teacher outreach.
The IEA is subject to a regulatory compliance case examining concerns about its political activity and the trustees’ oversight of the charity. As part of this case, on 5 February 2019, the Charity Commission (the Commission) published an 'official warning' against the charity. This is the regulator’s statutory power to issue a formal warning to charity trustees who have committed a breach of trust or duty, or other misconduct or mismanagement. The warning is designed as an initial step to ensure that the trustees are aware of the wrongdoing and to guide them through the process of rectifying the breach and preventing recurrence.
Breaching guidance on charitable political activity
The warning was triggered by a document published at a launch event that the IEA hosted in September 2018 entitled 'Plan A+ Creating a Prosperous Post-Brexit.’ The warning also criticised the uniform political alignment of the speakers invited to talk at the event, which included David Davis, the former Brexit Secretary and Jacob Rees-Mogg, the Conservative back bencher. The Commission found that the report and the event speakers had a political objective to change government policy on an issue unrelated to the charity’s purposes as it called for a particular approach to the UK’s exit from the European Union. This constitutes a breach of charity law.
It is important to note that while charities cannot have an outright political purpose, they are permitted to partake in political campaigning, including lobbying for a change in the law, policy or decisions, as far as the activity supports the delivery of its charitable purposes. For example, the charitable aim “to promote human rights” has more scope for allowing trustees to engage the organisation in political activity. The Commission’s guidance on what it permits contains the following examples:
- an organisation set up to oppose a new runway at an airport applies for charity registration. The commission would reject the application as having a political purpose, as it would oppose the government’s policy on airports
- an organisation set up to protect the environment applies for charity registration. The organisation carries out a range of activities, including some political activity aimed at securing a change in the government’s policy on airports. The Commission would accept the application if it was clear that securing a change in government policy was not the continuing and sole activity of the charity, but part of a wider range of activities aimed at furthering its charitable purposes.
The IEA’s launch event provided a platform for parliamentarians to promote an alternative Brexit plan to the one being pursued by the Government at that time. This was a clear political activity outside the charitable purposes. Importantly from the perspective of trustees, the Commission's official warning underlines the importance of ensuring that the charity's resources are directed towards achieving the purposes for which it is set up and for no other purpose.
Breaching guidance on the difference between advancing education and promoting a particular point of view
The Commission, of course, acknowledges that think tanks play an important role in society, challenging the public with new ways of thinking and stimulating debate. However, in this case, the Commission found that the IEA's report and launch event was not sufficiently balanced and neutral for an organisation with charitable status in furthering education. While the Commission acknowledges that education does not have to be “value free and completely neutral”, the guiding principle is to allow those being educated to make up their own minds. The Commission’s guidance on the issue states that a charity engaging in education should ensure that:
- it researches and presents information in a balanced way that encourages awareness of different points of view
- it considers the arguments in an appropriate way related to the evidence
- if it reaches conclusions, those conclusions are based on evidence and analysis.
The Commission pointed to the fact that the charity did not offer alternative points of view in its report or at the event, as evidence that IEA’s purpose in providing information was to persuade people to form a specific conclusion. The official warning states that “the report in question did not invite the reader to make up his or her own mind, and instead presented one proposal for the way that Brexit should be achieved.” The Commission does not consider that promoting a specific point of view falls under the charitable purpose of furthering education and they have reprimanded the think tank accordingly in their warning.
Risk to reputation
In addition to the breaches of charity law in respect of the IEA's charitable purposes, the official warning indicated that the trustees did not have sufficient regard to the charity's reputation. The high-profile nature of the launch event, coupled with the fact that the panel contained politicians who were publicly known to hold an allegiance to a hard Brexit, meant that the IEA risked the public perception that it is a politically biased organisation. David Holdsworth, deputy chief executive and registrar at the Charity Commission, said:
“Charitable think tanks are charities and need to behave as such, including by complying at all times with charity law. Like all charities, they share a responsibility for protecting the reputation of charity as whole. While the law recognises the role charitable think tanks can play in promoting understanding and learning and inspiring debate, it also sets important limits, designed to protect what is unique and precious about charity.”
As at April 2019 we understand that the Institute of Economic Affairs has submitted a request to the Charity Commission for a review of the official warning.
Some useful guidance for educational charities on the verge of political activity is reproduced from the Commission’s guidance below:
Outputs in furtherance of the objects (research, web articles, seminars and so on)
|What is acceptable
||What is not acceptable
|The purpose is to educate the public. It is balanced and neutral and allows the individual to form their own view.
||The purpose is to achieve a change in the law or policy which would not advance the charity’s educational purposes. It is not neutral and presents the individual with biased and selective information in support of a preconceived point of view.
|The researchers are not linked to a particular view or opinion.
||The researchers are linked to a particular view or opinion which suggests bias.
|The arguments and conclusions are based on an objective analysis of evidence/data.
||The arguments and conclusions are based on opinion and supposition.
|It is balanced and presents and explores both sides and a range of options. It is clear what process and criteria were used to achieve this.
||It is not balanced and only explores one side of the argument.
|It does not promote a specific policy unless that policy furthers the education purposes of the charity.
||It is designed to promote a specific policy and is really seeking to achieve a political outcome and risks being used as a political vehicle.
|At events, several people with a range of views on a topic each address the audience.
||At events, the audience is only addressed by people with the same views on a topic.
If you would like further advice, please contact Sara Sayer from Birketts' Charities and Social Enterprise Team.
This article is from the April 2019 issue of Essential Trustee, our newsletter for charity trustees and senior management. To download the latest issue, please visit the newsletter section of our website. Law covered as at April 2019.
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