What's the commission's response to the announcement from the Treasury about its 'blueprint to transform the way the government and the voluntary and community sector work together'?

Julia Unwin:When the Treasury first announced it was going to conduct a major study looking at the relationship between the government and the voluntary sector, and particularly the voluntary sector's role in public service delivery, we welcomed it. I was a member of one of the teams doing the work so I think its fair to say there haven't been any great surprises for us in the report.

The review is the first thorough consideration of the ways in which the voluntary sector can play a role in the delivery of public services. This for us at the commission is of great interest as it forms an important part of the voluntary sector's role in the whole of civic society and what the recommendations seem to me to do is to pull together a lot of good practice, point to a new settlement between the sector and the government and - although the proof will be in the implementation - there is a great potential there and it marks a real step forward.

The Treasury has made 42 recommendations. Is there any one which stands out to you as being the most significant?

Julia Unwin:It's invidious to single out individual recommendations. They fit together as a whole. If you want to increase the role of the voluntary sector in relation to service delivery you have to ensure that it has the capacity to deliver. But equally if you want small organisations to get on the playing field you have to attend to their funding.

Some will say that the report has not gone as far as they would like. Clearly the government can't control what local authorities will do but I think it sends absolutely the right signals to other funders to work more creatively.

How do you think Tony Blair's government treats the voluntary sector?

Julia Unwin:We have a government that understands the sector quite well. A number of ministers come from the voluntary sector- and that makes a difference. The government has worked very closely with some organisations and there's no doubt that for some voluntary organisations, their particular campaigning agenda is now government policy. This is an enormous step forward. For a long time organisations were campaigning outside government and now they're very close to the government, and are having to learn to manage this new relationship.

Funding mechanisms needed review sooner rather than later, that's why I'm particularly pleased to welcome the Treasury report. There's no doubt that the way government funding has been structured has shaped the voluntary sector, and the way that particular government funding levers operate together has made a difference to how the sector has operated.

I think there are times when the sector needs to maintain its independence from government and we at the commission believe, along with the voluntary sector, that independence is one of its great strengths. The full implementation of the compact, which this report also talks about is a really welcome way of underlining that.

What is the role of the charity commission?

Julia Unwin:We are the regulator for the charitable sector of England and Wales. In this country, what most countries call civil society is very largely made up by charities and there is a very wide range of organisations and different types of organisations - 186,000 charities - which fall under our remit. And the sector is a vast and diverse one, with a total annual income of over £26 billion, and assets worth over £70 billion.

Although our job is to regulate charities, they are independent organisations, which operate entirely separately, and trustees are charged by law to operate in the best interests of their own charity and their charitable objectives. So our job is not that of a commercial regulator - we don't price fix, we don't intervene to 'manage the market'- our job is to help charities use their resources to best effect. We also do that by promoting better administration and by investigating and remedying abuses. We think that our role can help charities become more relevant, more effective and provide better value for money for charity stakeholders.

In this country charities are still held in high regard and I think the charity commission has an important role in maintaining this

What is your role as a commissioner?

Julia Unwin:There are five charity commissioners as defined by statute. One of them is a full-time executive - the chief charity commissioner. The rest of us are non-executive commissioners, two are lawyers and one an accountant. We really have two roles. One is being non executive board members and in that sense we are very similar to non executives in other sectors. We also have a role externally in representing the commission.

My particular job is to maintain the links with the voluntary sector. I take responsibility as consumer champion on the board so I'm the board member with responsibility for making sure that our customers are well served.

What's the Commission's relationship with central government? How is it accountable to its customers?

Julia Unwin:We are accountable to Parliament and that is rather important in this instance. We are a non-ministerial government organisation, which means we can't be politically directed. That's extremely important for the charitable sector because it means those questions of charitable status and charitable operations are not determined by political changes.

We're responsible to the courts for our decisions and we're responsible to the home secretary for how we spend the money that keeps the operation going. We've recently been reviewed by the National Audit Office and our chief commissioner has had to go to the Public Accounts Committee to report so we're openly accountable in this way, although we don't have a ministerial line.

Is the charity commission keeping pace with changes in society?

Julia Unwin:In many ways the commission is a modern, effective regulator. We put a premium on the high quality of our services, and surveys of our customers show that we are doing pretty well. We're always improving and developing our services but as with other walks of life, public perceptions often lag somewhat behind the changes we are making at the commission.

About five years ago we launched the review of the register. The register is the list of those organisations that are charitable. By that phrase we meant that we would review the grounds on which organisations could become charities within the law. Before we started that review, organisations concerned with urban regeneration, relief of unemployment and community development, to name three examples, had to struggle to fit in with the charitable definition. The review of the register is an ongoing process of making sure that our understanding of charitable law is kept under constant review, and that we can keep up with changes in society, and make sure that our regulation is suitable for the 21st century.

We have gone through a very thorough process of looking at whole sections of new activity and have deemed which bits of it are charitable and which are not. Clearly you don't want charitable status to be applied to businesses run for private profit - it would be an abuse of the term and public confidence would collapse. Equally you don't want charitable status to be tied just to the objectives set up in the 16th or 17th century and our job as commissioners is to bring some outside view, to consult widely and to make sure we keep in touch with public opinion. That doesn't mean we should be simply following fashion, changing charitable status whenever the mood takes us, because its extremely important that public confidence is retained.

Will the charity commission meet government targets to deliver services electronically?

Julia Unwin:We fully intend to and have done an enormous amount already. Certainly when I first came to the charitable sector 25 years ago it was very difficult to find out why the commission made the decisions it did. Today, you can log onto our website at www.charitycommission.gov.uk and look at the internal guidance our staff use to make their decisions.

All of our publications are on the website, and of course the entire register of charities is there. We get about nine million hits a year on our website, which is tremendously popular with charities and is highly-rated. But even when our services, such as applying to register a charity, are available online, some will still prefer to do business with us on paper. Our aim is to make sure that charities can deal with us equally efficiently in whatever way they want. All of our inquiry reports are also published on the website and people do look at them - because Commissioners like me get asked all the time about them.

In 2001, we initiated a major programme of work to enable us to have the capability to create, store and retrieve all records electronically from 2004 and to deliver services electronically by 2005.

I'm pretty confident we'll meet the government's targets, but as you know, along with all government departments, it can be fairly uphill.

How diverse is the voluntary sector?

Julia Unwin:The sector is very interesting because we have 186,000 members of which 90 per cent of the money is in six per cent of the charities - this has been pretty constant over the past five years or so.

The 'household name' charities, the ones that control most of the large money, are a very small percentage, and this makes the regulatory challenge very different to that of the Financial Services Authority for example. We have to pay very different levels of regulatory attention to the largest and the smallest charities - to reflect the damage that could result if things went wrong in a charity, and to also reflect the different capacity of charities to cope with the demands of regulation. The multiplicity of small local charities are of course vitally important and, together with the major charities, provide the civil society which is at the heart of British life.

Some large charities have recently been criticised for making a difficult managerial decision in terms of their costs. Our role as regulator is to say that charitable trustees have to make those decisions. They are running businesses. Just because they are not-for-profit, doesn't mean they don't have to be run the right way.

Unfortunately there will very often be criticism because people who give their money want it to go directly to the cause. But you cannot run an effective business unless you have good offices and computers - all the stuff that people running a government department or a newspaper takes for granted. And funds don't just appear - charities have to spend money on generating income to fund their services. Appeals for voluntary donations, applications for grants, tenders for contracts, hiring investment managers - all these cost money.

Charities need to educate the public. They must demonstrate the relationship between their overheads and their activities, and this will help the public to understand them better. This was one of the recommendations of the cross-cutting review, and one that we support wholeheartedly.

What challenges lie ahead for the sector?

Julia Unwin:All service delivery organisations - whether public, private or charitable - are going to be challenged on performance. More and more, the ease of information that we all have, and we all expect to get hold of - ePolitix being a good example of that - means that there is no hiding place for organisations and the public in the broader sense is going to be interested in how effective an organisation is and how it spends its money.

There is going to be an increasingly high expectation that charities should put that information in the public domain. Most charities are responding to that challenge but changes in society - largely fuelled by technology - will make a very big difference to the sector. The fact that members of the public can now get access to any charity's accounts, and that we can compare them very quickly, means that charities will no longer be able to operate in a private way. I think that's welcome and that's a major change.

I think also that charities which become involved in what used to be public service delivery, such as running nurseries, old people's homes and some parts of the health service, will be challenged more and more because we live at a time when the public mood is much more challenging.

What sort of voluntary sector would you like to see ten years from now?

Julia Unwin:An independent voluntary sector which can speak loudly on behalf of its beneficiaries and doesn't feel muzzled and unable to do so. A sector which is very diverse. I think its incredibly important that the voluntary sector develops to include black and minority ethnic organisations but also organisations run by people with disabilities, organisations that look different to the ones now. For example, we have issued clear guidance that charities can be run by their service users and this may help shape many charities' governance arrangements.

The voluntary sector has to continually refresh itself and I think we're heading in that direction. It also needs the sort of leadership which gives it confidence and enables it to help voluntary organisations to grow.

What is the UK's record on charitable donations when compared to other countries?

Julia Unwin:Compared to other European countries, it is a variable picture, but compared to the United States, which is where we're most often compared, we haven't got such a good track record. I think there's a lot of things we can do to rectify this. Giving the public confidence is key and all the polling we do suggests we're on the right track with the things the public is concerned about.

We also work very carefully with other government departments. The Giving Campaign, which is partly funded by the Treasury, is engaged with spotting what the obstacles are. Most of the analysis shows that the British public, particularly poorer people in poor regions give quite high levels, it's higher wealth individuals who don't give as much. I think this is to do with cultural reasons but there are also barriers for giving and one barrier to giving may be information about charities and that is certainly one which the commission is working to rectify.

Has the lottery had any effect on charitable donations?

Julia Unwin:Well I think there are different ways of looking at it. The lottery as a distributor has made an enormous difference to the income of charities. The Community Fund and the Arts Council, for example have changed the shape of the voluntary sector because so many small charities have had quite significant sums of money, albeit for a short period of time, but have been given an opportunity that they never would have had before.

There have been different studies on whether the lottery has affected the net amount. My guess is that it did make a big difference when the lottery was first introduce, when people buying lottery tickets may have believed that they were donating to charity. The information is now much clearer, and the public is increasingly well informed. The crucial message that charities have heard is that it is important that they examine their income streams, including funding (both government and other) fees and charges, fundraising and investment income and ensure they are not reliant, to the detriment of the charity's work, on only one source. Diversity of income sources is clearly key to reducing the risk of one income source drying up.

What's your view on charities employing young people to ask people for donations on the city streets or outside major commuter junctions?

Julia Unwin:The target audience they are after is young givers because its extremely important for charities to get young people to give so they're giving in the long term.

I am aware that some people are offended by this approach to fundraising and find it harassing and I don't personally like it. I also know that some of those charities have done an enormous amount of work to improve the way in which they're done. However, charities also need to think about the risk to their reputation against the benefits of the money coming in.

The first thing these individuals should say to a member of the public is to admit that they are being paid by their charity to raise funds. Charities also need to develop their own guidelines and stick to them. There should also be ways which individual members of the public can complain if they feel harassed.

Although I wouldn't want to stop charities being imaginative, the area I am concerned about is the requirement on younger people to sign up and make financial commitments - they wouldn't be able to do this if they were selling an insurance scheme for example.

When I make speeches about this I say that charitable trustees are responsible for charitable assets and one of the biggest assets a charity has is its reputation and you shouldn't gamble on this.