A farewell to alms - of the dottier sort

Our absurd charity laws benefit public schools and lady bountifuls, yet penalise self-helpers. Reform is vital

In 2001, England's first charity law will be 400 years old. How much more worthwhile an anniversary it would be if we were to use it as the occasion for reform of the extraordinary muddle and hotch potch of political expediency and near dishonesty that passes under the name of "charity" at present.

Applying a tin opener to this can of worms comes a report today from a commission sponsored by the National Council for Voluntary Organisations. Although independent, the membership of the Commission on the Future of the Voluntary Sector is drawn from those up to their necks in the charity world - so it is hardly cause for wonderment that it steps daintily around the really tricky issues. Reform - yes - but no talk of who the losers would be among the charities.

Why is reform vital? Because the charitable sector now has a turnover of pounds 15bn a year with capital worth some pounds 25bn. It matters because charitable status means every taxpayer is contributing heavily in tax forgone to a large number of mainly unaccountable and unscrutinised organisations, performing tasks that may or may not do much good.

It matters all the more now that the National Lottery is disbursing vast sums to charities, amid howls of protest about what is and what is not a worthy cause. Clarity about charity matters now more than ever as charities increasingly turn themselves from alms-givers into arms of government, competing for state contracts with the private sector.

In Queen Elizabeth I's day, when charity law got going, charity meant helping poor people. What does it mean now? At present four categories of activity officially qualify for charitable status - the relief of the poor; certain purposes recognised as beneficial to the community; the advancement of religion; the advancement of education. (Strict legal definitions say nothing, note, about animals or the other bizarre causes that have slipped in.)

Queen Elizabeth II's government - if it were to start from scratch - would have to rule out religion. The majority no longer believe in it, and it would be hard in a multicultural and heathen society to prove it did good rather than causing divisive harm. The Charity Commission accepts some cults; others are excluded, but there is little to chose between some of them.

As for education - that is the biggest worm in the can. The law was designed to encourage the rich to pay for the education of the poor but now the poor taxpayer has ended up contributing to the education of the rich - the notorious Eton Question. Any reform of charity law would have to strike out the public schools. This has nothing to do with socialist vindictiveness or any desire to drive them out of business, for which there is rightly precious little public enthusiasm. It is simply impossible to reconcile Eton with the idea of charity: by no stretch of the imagination is Wills' and Harry's education a charitable cause.

But controversy is no reason for a government, left or right, to flee from charity reform. For if the Government wishes to offer some equivalent support to private schools it can do so through some other educational tax dispensation without bringing the name of charity into disrepute.

Reform would bring other losers, otherwise there is no point in it: religion and animals would be fallers under any new law that made any sense. Today's Commission report recommends a single criterion for charitable status - a simple declaration of "public benefit". But the Commission leaves it to others to determine who falls into that net.

There would be new winners - they are the weak, the small and those without clout. Currently excluded are some of the best and most useful new groups: self-help groups - everything from tiny prisoners' families groups to anti-drink and drug or smoking groups - left out because they do good to themselves and not to others. The old-fashioned law says that only lady bountifuls get charitable status while self-helpers do not.

The flourishing new credit unions, social justice groups, human rights groups and many job creation and unemployment schemes are also currently excluded. The closer to the ground, the more local and genuine the group, the harder it is for them to fulfil the criteria for charity registration. It means the big old charities that may have lost their original freshness and zeal lie across the tracks of smaller user-groups who want to get started. Today's report offers excellent recommendations for revitalising the whole sector.

But the real problem in all this - the one that will frighten any government - is defining in the modern world what we mean by the "good". Can we still agree on common purposes? The right-wing press's outbursts against some of the causes supported by the National Lottery Charities Board's shows the problem. They only like the cuddly causes - children and the deserving sick. Forget Aids prevention among gays, rehabilitating criminals, starving victims of African wars, or treating bad boys and drug addicts. If we were to reduce charitable status to just those causes that no one could object to, then we'd end up with nothing but the National Society for the Prevention of Cruelty to Children, cancer research, the National Trust and lifeboats.

The answer could be that none of them should get tax-exempt status. All these voluntary organisations should simply operate as not-for-profit companies, under normal consumer protection and company law. People could continue to donate according to their own particular whim - donkeys for some, drug addicts for others. The Government likewise. If old ladies want to leave money to cats, I do not want to be party to that lunatic transaction by being forced to add to their donations through tax relief taken from my pocket. The more they give, the more we all give too.

What is the chance of a bold new incoming government seizing this bunch of nettles? Small I fear - though if something is not done soon, the public may lose faith in the very idea of charitable giving, which would be a tragedy. There is nothing in it for politicians - except a guaranteed row of nuclear proportions. So, out of cowardice, they will probably continue to let sleeping guide dogs lie.