"A draft Bill on charities will also be published which will modernise charity law and better enable charities to prosper."

Under these long-awaited proposals to reform charity law, many campaigning and social justice groups would be able to apply for charitable status.

Plans outlined by the Home Office in July 2003 outlined proposals for a new application process, which would require organisations to pass a two-stage test to qualify as a charity.

Firstly, their objectives would have to match one or more of those on a new list, which includes goals such as the advancement of amateur sport, and the prevention of poverty.

Next, the organisation would have to show it was run on the "principle of public benefit".

On-going checks would then be carried out by the Charity Commission on an organisation's "public character".

The changes would mean organisations like Amnesty International, could become charities.

The changes may also allow trustees to be paid for work carried out for a charity outside of their role as trustees.

There are concerns that this could create conflicts of interest, so safeguards have been planned, which could include limiting the remuneration they may receive.

The voluntary sector has warmly welcomed the plans, and looks set to keep pressure on the government if it fails to live up to its promises to introduce full legislation soon.

The proposed new Charities Bill may not have grabbed many headlines after the Queen's Speech, but it will be good for charities, the general public and their relationship with each other, says charities minister Fiona Mactaggart.

One of the main aims of the draft Bill is to help new and existing charities to thrive and grow. We want charities to be key players in building a generous society: encouraging people to give their time and talents so that local communities and people with common interests can deal with their own problems and build a better society.

So - first things first - it will produce a clear definition of what "charitable" means, laying out all the purposes that are, or ought to be, recognised as charitable. Public benefit will remain as the most fundamental test of charitable purpose. It's certainly time for an update - the list of purposes has remained the same since the time of Elizabeth I!

The Bill will make life easier for charities. It will aim to streamline the administration of charities, so they can be more efficient and effective. In the past, some charities chose to incorporate as a company limited by guarantee. This meant that they ended up being regulated by both charity and company law, and that a potential conflict of interest was created for board members who were trustees and directors at the same time. In the Bill, charities that wish to take a corporate form will be able to become a Charitable Incorporated Organisation (CIO). This new type of company will be regulated by the Charity Commission and it will end the absurd demand on directors to take decisions in two capacities.

Other practical measures are designed to make life more straightforward for charities. For example, trustees of a charity will be able to be paid to do work for the charity themselves. So, if, for example, one of the trustees of a charity was a builder, the charity could now employ them to work on buildings it owns, something that was previously prohibited. Of course, this measure would contain proper safeguards to ensure it is not abused.

Charity trustees would also be able to apply directly to the Charity Commission, as well as to the courts, for relief from personal liability for breach of trust in instances where they have acted honestly and reasonably. This is intended to encourage more people to act as trustees, giving them confidence that they are unlikely to have to pay money out of their own pockets if things go wrong in unforeseeable circumstances. Of course, trustees found to have acted fraudulently would still be personally liable.

More comprehensive information about charities will be available. Charities will be more accountable, their workings more transparent and their achievements more evident. Clearly, charities will benefit from increased public confidence - confidence that the money, effort and time they are giving to charitable causes is being well used. In turn, as people see the extent and impact of charities' work, they will feel that as an individual they can make a difference by contributing to a charity. It is in this way that the Bill aims to help charities realise their full potential as a force for good in their communities.

Anyone wanting to find out detailed information about a charity will be able to find it simply by searching the Charity Commission website. The Commission itself will be made more accountable through a range of measures. The number of Commissioners will rise from 5 to 9, and there will be a separate Chair and Chief Executive. Also, anybody wanting to challenge the Charity Commission's legal decisions will be able to go to a new Charity Tribunal - which will be much cheaper than trailing through the courts.

The Bill will seek to ensure confidence in charitable fundraising, updating the law to recognise methods of giving (such as giving a direct debit commitment to a face-to-face fundraiser) that didn't exist when the last law was written, and modifying the licensing scheme for public collections. We are encouraging self-regulation aimed at improving standards of conduct and practice in fundraising. Everyone recognises that you can only be confident in charity collections if you know, for example, what the cost of organising the collection itself is. We want to arrive at the point where, when you give money to a collector on the street, you are happy that it will benefit the good cause effectively.

Provisions will be made for the Home Office to regulate fundraising if self-regulation fail. The Government is committed to giving the sector every chance to provide better regulation and ensure that public confidence is maintained.

Charities are a powerful force for good in our society. This Bill will help to preserve this capability by creating a clear modern definition of charity and helping to make sure that charities conduct their business well. This will help build up public confidence which is crucial to help charities of every kind to contribute to a better world and which will encourage people to be generous with their time and money - which of course charities need to work well.