Downing Street has rejected warnings by charities that its new lobbying legislation would restrict voluntary organisations from campaigning on matters of public interest.

Ministers met representatives of National Council for Voluntary Organisations (NCVO) ahead of the second reading of the Government’s Lobbying Bill today. But they refused requests to make changes to the legislation which charities fear will have a “chilling effect” on their ability to campaign.

Under the proposed new law any organisation deemed to be promoting a message which supports or attacks a political party or candidate will only be allowed to spend £390,000 during the run up to an election campaign, rather than the current £988,000.

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At the same time any campaigning group that spends more than £5,000 over the period will be forced to declare details of their expenditure to the Electoral Commission. The move could potentially affect third-party campaigns on fracking, student loans and the NHS in the run-up to an election as well as small and local campaigns.

Ministers argue that only the small number of charities which explicitly promote particular parties or candidates will be caught by the provisions of the Transparency of Lobbying, Non-Party Campaigning, and Trade Union Administration Bill. But groups such as Oxfam, the Royal British Legion, and the Salvation Army are among organisations that fear the Coalition Bill is so complex and unclear that it is likely to be “impossible” to follow, while the Electoral Commission has warned of concerns about the “workability” of the legislation.

An electoral law expert commissioned by the NCVO to assess the impact of the reforms said that they could have a “chilling effect” on charities. But the Prime Minister’s spokesman claimed that provided the charities were not promoting the electoral success or otherwise enhancing the standing of a particular party or political candidate they would not be affected.

“My understanding is that at the 2010 general election, very few charities were registered as third parties. That is why we are saying that, provided charities continue to campaign as the vast majority of them always have they won’t be affected.”