Even politicians are frank about it: the country's worst-ever downturn will drag countless people into the most precarious financial position of their lives. But no matter how desperate the circumstances, help is always at hand — even if it means turning to charity.

The problem is that more than a quarter of those questioned in recent research said that they would be too ashamed to receive help from such a source.

Dame Suzi Leather, chairwoman of the Charity Commission, intends to change all that and is leading a three-pronged attack to achieve her ends. She is campaigning for wider understanding of what charities do; to overcome the “barrier of reluctance”; and, finally, to shake up the charities themselves where necessary.“It is clear that there is an endemic reluctance from a sizeable proportion of the public to seek help from a charity. The Poor Law casts a long shadow,” she says.

Dame Suzi believes that outdated perceptions of charities' work are partly to blame, with many people unaware that museums, universities, independent schools and hospices are charities. “Research has shown us that the public don't have a very accurate idea of what charities actually do.”

Despite the reluctance, about a third of charities say that demand for their services exceeds supply, according to research by the Commission and Ipsos MORI. When the “hidden” need of those not seeking help is taken into account, the unmet demand is likely to be far greater, Dame Suzi says, but she fears a double whammy for charities as investments and legacies plummet in value and people and companies donate less.

About 16 per cent of charities polled said they do not have enough cash to fund activities, while public contracts are being squeezed. “There is inevitably a danger of being asked to do more with less. Commissioners of services are also strapped for cash. Negotiations are going to get very difficult,” Dame Suzi says.

This brutal financial climate leaves no room for overlap. To survive, charities should consider merging with competitors, she says. Above all, they must persuade local authorities of their importance. “If they can't convey that unique public benefit, then they don't deserve public support,” she says.

The Public Benefit Test, which comes into force in April, is the commission's hotly debated attempt to translate the Charities Act 2006 into practice. For the first time organisations will be asked to prove a “material” benefit to the public. Those that fail will lose their charitable status.

Yet just how these stringent standards will stand up in the recession is still being worked out, it seems.

Independent schools are concerned. Tony Little, the Head Master of Eton, said that the crisis would make it “impossible” for some to offer bursaries, an acceptable charitable activity cited by the commission, and he asked instead for recognition of the savings to the taxpayer that private education creates.

Will standards be relaxed? Dame Suzi says: “We certainly expect schools to be doing all they can. But we will be reasonable about it. Given the difficulties [they] are in, we will not be pursuing a counsel of perfection. Schools need time to change and it may be they need more time during the economic downturn.”

Now in her third year at the helm, Dame Suzi is frustrated by misconceptions. “The public needs to be more realistic about what charities need so that they can do their work,” she says. “The idea that they shouldn't have premises or pension funds or pay their executives a decent salary is nonsense. These are often large, highly competent, very complex organisations.”

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