Legal drivers

To cope with the demands of the pandemic last year, the government encouraged contracting authorities, whether local councils or central government departments, to offer support and flexibility to organisations delivering contracts. This was particularly important for charities delivering public service contracts.

Although we know implementation has not been universal, guidance issued early in the pandemic has encouraged public bodies to, for example, relax key performance indicators and offer average payments for organisations struggling to deliver payment by results contracts. In addition to making sure service providers could stay afloat, this guidance supported public bodies’ work in partnership with charities to deliver responsive support for communities. While this guidance was not extended beyond October 2020, it demonstrated the flexibility that is possible within the current system and how flexibility can enable better working relationships between public bodies and charities. Going forward, if public bodies do not take a supportive approach, charities could face more issues related to defaulting on contracts and failures in supply chains.

The government published a green paper at the end of 2020 setting out proposals to change UK procurement post-Brexit. This does not represent a radical change to existing procurement regulation, but it does provide an opportunity to talk to government about better ways of delivering public services with charities. As ever, the major flaw in the green paper is that it does not recognise the difference between organising public services for people experiencing complex issues and, for example, purchasing office supplies.

The role of the Charity Commission

One of the few certainties that charities have is that the current chair of the Charity Commission Baroness Stowell is standing down from her position in February, after having served only one term. This opens up the process of recruiting the next chair of the Commission and will inevitably attract a lot of attention from charity trustees and leaders given the importance of this role in setting the relationship between the regulator and the sector. Despite calls from a number of infrastructure bodies to change the process, it is likely that the appointment will reflect the government’s priorities. The outgoing chair's regular references to the impact on public trust of individual charity failings and emphasis on a need to 'stay out of politics' when addressing pressing social issues such as racism and the UK's historic role in slavery have been unpopular across the sector. It remains to be seen whether the next appointee will take a different approach.

In any typical year, the regulators such as the Charity Commission seek to implement new regulatory obligations that organisations must respond to. However, the past year has been far from typical. Regulators have ushered in a period of ‘regulator forbearance’, showing a willingness to identify where rules can be relaxed to allow organisations much needed flexibility during this period. In response to the unique circumstances of the pandemic, the Charity Commission has asked organisations whose annual accounts/reports filing will be impacted to contact them and has also issued new guidance on reporting serious incidents during the pandemic as well as guidance on mergers and collaborative working.

The regulatory impact of the deal with the EU

Having a deal in place doubtless gives more certainty for charities in relation to regulatory areas such as data, product standards and workforce, yet there will still be challenges adapting to the new rules for some charities. The government has issued specific guidance for charities as well as detailed guidance on the key issues such as products, environmental and data standards which will be relevant for many charities to consider.

On product standards, the new legislative framework has introduced, for certain legislation, a UK regulatory mark that will be affixed to products or their packaging. The role of this UK conformity assessed (UKCA) mark will be to support authorities and provide clarity to manufacturers placing products on the market in the UK post-Brexit. The EU concept of 'harmonised standards' will be transferred into UK law, now termed ‘designated standards’ and from exit day, the relevant secretary of state will cite these designated standards to provide assurances that UK product standards will be upheld as they are in the EU.

EU environmental law accounts for around 80% of UK domestic law on the environment. This covers air quality, waste and resources, water, wildlife and habitats, chemicals, and pesticides. The EU Withdrawal Act 2018[v] will ensure all existing EU environmental law continues to operate within UK law, with enforcement powers transferred to domestic institutions and the UK government has pledged to establish a new, independent body to ensure accountability for environmental issues. The UK has also agreed to maintain EU standards in relation to human rights.

The government has already enshrined GDPR in UK law. Formal agreement has yet to be reached on whether the UK will secure data adequacy, where a country is said to provide equivalent protection on personal data, so that data can flow freely to EEA countries without additional safeguards. A bridging mechanism has been put in place to allow this flow of data for up to six months. The government is recommending that UK organisations that transfer data to and from organisations in the EU put in place alternative transfer mechanisms. The UK Information Commissioner’s Office (ICO) has been positive about the implications of the Trade Agreement: The ICO has also undertaken to update it’s guidance to organisations to reflect the extended provisions. Charities will want to keep up to date with both the Government and ICO guidance on this matter.

Employment and volunteering post Brexit

The Institute of Public Policy Research (IPPR) has cautioned that changes in freedom of movement could affect the charity sector’s ability to recruit EU citizens as well as pointing out the concentration of EU charity workers in social work and residential care. If a charity currently employs an EU, EEA or Swiss citizen, they must apply before 30 June 2021 for the EU Settlement Scheme in order to continue living and working in the UK. There is also an employer toolkit that has been created for organisations to support their workforce.

Charities may want to review hiring needs over the long-term. Considering whether they need to fill any skills gaps either because of EU staff choosing to leave the UK or because of reduced supply of EU workers. Although given high levels of unemployment in the UK, this is perhaps no longer as big an issue as it once was.

Volunteering is a ‘permitted activity’ for visitors to the UK but that provision only covers a person volunteering up to 30 days in total and only if the main purpose of their visit is not volunteering. People who are visiting the UK to volunteer will need to obtain a ‘Temporary Worker – Charity Worker’ visa, which replaces the old Tier 5 visas.

Good governance in bad times

It is a sad truth that more trustees than ever will be facing decisions about closure this year. Good governance is more important than ever and is about more than just legal obligations and finances.

NCVO has always made a strong case for issues such as ethics, integrity and diversity to be central tenants of charity governance. Recent changes to the Charity Governance Code have provided some recommended outcomes and steps charities can take. Designed to help Trustees ensure high standards of governance, the code has been updated after a consultation involving some 800 charities. The ‘refresh’ has focussed on the principles on ‘Integrity’ and ‘Diversity’ (now ‘Equality, diversity and inclusion’). The revised code includes the importance of values and power dynamics in decision making, as well as the need for boards to take a systematic approach to inclusion beyond they own composition.

The government issued new guidance for charities on managing financial difficulties caused by the pandemic and changes have been introduced by the Corporate Insolvency and Governance Act 2020 (the Act) to help organisations keep operating and try to avoid insolvency. These provisions apply to charitable companies and charitable incorporated organisations (CIOs). The changes mean these organisations have some leeway from debt enforcement action so they can explore options for rescue or restructure. Termination clauses in contracts have been limited so companies and CIOs can ensure supplies and carry on operating.

One of the parts for the Act of importance for all charities is the provision to enable remote meetings, even where governing documents prohibit this. The general pivot to governing remotely via video conference has presented barriers, but for many charities it has been an enabler. Perhaps the biggest challenge of remote board meetings is that they do not afford trustees the opportunity to build relationships in the same way and so boards are finding they need to engineer this. It is likely to continue well into 2021 and may well be a feature of governance of the future.

As a result of the pandemic, more people are likely to need legal advice and recourse on issues such as employment, housing and debt. For example, in July 2020 Citizens Advice reported a 332% increase in demand for advice about rent arrears. Charities have been instrumental in securing and extending a ban on evictions until at least 25th January 2021 and continue to call for renters to be able to access financial support.

Before the pandemic, reductions in access to legal aid and a rising backlog of cases led to signs that the legal system was struggling. With Her Majesty’s Courts and Tribunal Service moving to remote hearings, young people and those with learning difficulties have reported more negative experiences. Trials in the magistrates’ courts and Crown Court have not been able to progress remotely, meaning that victims and defendants wait longer for an outcome. These challenges will be a concern for any charity supporting people to move through the justice system.

Shrinking civic space

During the pandemic we have seen an unprecedented acceleration of law making as politicians cooperate beyond party lines and the public accept game-changing legal measures that would normally require greater scrutiny to pass on. The narrative of being on a ‘war footing’ has in effect enabled a significant erosion of individual rights and civil liberties. Disabled campaigners have spoken out against the ‘easements’ of Care Act duties, which significantly undermine rights to independent living. In response rising demand for support, charities will continue to have a vital role to play in offering advice and guidance as well as campaigning.

This is of course all on the understanding that such erosion is temporary in nature but there are wider signs of restricting civic space which include calls to abolish the electoral commission and potential changes to judicial review. Judicial review has been an important tool for civil society to hold government to account, so charities will be concerned at any new restrictions. Given the direction of travel, it is not unreasonable to expect some continued shrinking of civic space and individual civil liberties. In turn, it may be that charities find themselves working with individuals and communities who find their lives increasingly restricted.

Moving forward

Questions your organisation might want to consider:

  • Have you spoken to the organisations or bodies you hold contracts with about the flexibility you or they need to deliver during the pandemic? How might the proposed changes to procurement regulations impact your organisation?
  • Has your organisation considered the new approach to product, environmental and data standards and how these impact on you?
  • Has your organisation thought about potential skills gaps or workforce shortages resulting from fewer staff/volunteers from EU countries?
  • Has your organisation considered how it might support existing staff and volunteers from EU countries?
  • Has your organisation reviewed the Charity Governance Code?
  • If you’re experiencing difficulties, have you reviewed the Government guidance and taken advantage of the Corporate Insolvency and Governance Act 2020?
  • Are the people you support or represent likely to experience any reduction in rights or civil liberties and if so, what does that mean for your organisation?