Charity rules are a challenge for Church

When a neighbouring church in the city centre was made redundant and its parish added to mine, I inherited an ancient registered charity which paid a fee to the preacher for the sermon on Whit Sunday, the remainder of the income to be used to provide bread for the poor.

Unfortunately the income was only £5 a year. I asked the previous incumbent, long retired, what he used to do with it. "Oh," he said, "I used to let it mount up to £30 or so, then, having preached every Whitsun, I went out for a good meal, and gave the poor waiter a £10 tip".

I am pleased to say that the Charity Commissioners allowed me to amalgamate the charity with other church charities that did provide a useful sum to do some good. As trustee of a number of charities in my time, I have always appreciated the sound and supportive advice of the Commissioners, and their regulatory, if distant, role, even if I have rued the ever-mounting bureaucratic form-filling they require.

But things are rapidly changing in the world of charitable status since the new Charity Act of November 2006 came in, spurred on by the Commissioners' crusading chairman and new broom, Dame Suzi Leather, who is determined to change the status quo of middle -lass Britain by forcing changes on private schools and hospitals - and yes, also on church and religious institutions.

Up to now, for hundreds of years, non-profit-making organisations promoting education, health and healing, and religion have automatically qualified as charities. This has enabled them to receive tax benefits in recognition by the state of the good work they do in the community, not all of which the state can afford to do on its own, hence its much vaunted 'valued partnership' with voluntary and charitable bodies.

The new Act of 2006 removes the presumption that charities relieving poverty, or advancing health, education or religion are of benefit to the public, and requires them in each and every case to "prove public benefit".

Rather strangely, in scrapping the automatic charitable status, the government has left it to Dame Suzi and her Commission to work out what that means, and how many hoops must be jumped through to win back charitable status. Charities are to be consulted over this requirement before the new definition is fully enforced in early 2008.

I must say I suspect this change in charity law is politically driven, and is aimed at private schools and hospitals. If so, it is a backdoor method to effect political change, and my worry is that the churches could be caught up in the fall-out.

Private schools and hospitals, while non-profitmaking, are in a different category to churches because they charge fees and provide a service for that fee, whereas churches, and a host of other charities, rely on voluntary giving.

With regard to private schools and hospitals, there are arguments on both sides. All education and hospital care by whatever provision surely benefits the community, but it may become elitist if only the rich can afford it.

On the other hand, should not people be free to spend their money in this way if they please, especially as they are relieving the state from the cost of their education or health care? Dame Suzi is clear that private schools will have to go much further than just sharing playing-fields with state schools, and holds up as an example one school which is building up a bursary fund large enough for it to go "needs blind" within 25 years, admitting pupils regardless of income.

A very big hoop indeed! Dame Suzi, you will be pleased to hear, will personally stand back from decisions about private schools because her own daughter attends one.

What about the public benefit provided by churches? Well, this has to be worked out, but may not be easy to prove. Would it include the promotion of ethical and moral codes? Or the support it gives to people at key stages in their lives?

The active promotion of community and fellowship may be a more obvious benefit, as may social outreach and support to the young, the elderly, and the poor. But monasteries and charities devoted to prayer may have some difficulty proving a public benefit to a more and more secularised state.

The advancement of religion is part of the purpose of all churches, and the main purpose of many religious charities. Would this be acceptable to all as a "public benefit"?

More than 60pc of the responses to the Commission's recent consultation were from faith-based charities. Jewish leaders are worried because Judaism is not a proselytising religion, and many of its activities are not obviously accessible to the wider public.

Dame Suzi assures us she is not trying to secularise British society and drive religious organisations out of charitable status, but the churches will be watching developments closely and with some anxiety. Churches do not exist solely for the 'production'of public benefit, though they do have purposes that are for the public benefit. What they will need to prove to satisfy the Commission is not yet clear, but is the Government right in leaving this to Dame Suzi to decide?