The secretive group that inspired Liz Truss’s disastrous mini-budget should be stripped of its charitable status, a former charity regulator official has said.

Earlier this week, the prime minister was forced to U-turn on scrapping the top rate of income tax after the pound crashed to a record low against the dollar and the Bank of England had to make an emergency intervention to prevent pension funds collapsing.

The Institute of Economic Affairs (IEA), a free market think tank that has long been close to Truss, took credit for the doomed policy when it was announced by the chancellor Kwasi Kwarteng in September’s mini-budget.

Andrew Purkis, who served as a board member on the Charity Commission between 2007 and 2010, has accused the IEA of breaching the regulator’s rules on political lobbying.

“The very purpose of the IEA – shrinking the state – is political, and their version of ‘education’ is promoting a predetermined and controversial point of view and cannot be charitable education,” wrote Purkis for Civil Service Media.

Charities are allowed to engage in some political campaigning under the Charity Commission’s rules but “cannot exist for a political purpose, which is any purpose directed at furthering the interests of any political party, or securing or opposing a change in the law, policy or decisions either in this country or abroad”.  

The prime minister has been one of the biggest supporters of the think tank, having spoken at more of its events than “any other politician over the past 12 years”, according to its director Mark Littlewood. 

Truss also founded the Free Enterprise Group of Conservative MPs – a parliamentary wing of the IEA – in 2011, just a year after becoming an MP, and hired the IEA’s former communications director, Ruth Porter, to be one of her senior special advisers when she entered Number 10 last month.

The think tank has lobbied for many of the policies that were announced in the government’s mini-budget, including scrapping the cap on banker’s bonuses and cutting stamp duty.

Tim Montgomerie, a former adviser to Boris Johnson, wrote on Twitter that the mini-budget was a “massive moment for the IEA”. “They’ve been advocating these policies for years,” he said.

Purkis said it was “unjust” that the IEA is allowed charitable tax exemptions while allegedly not abiding by charity law.

“It is a regulatory failure of the [Charity] Commission over years to have repeatedly rapped the IEA’s knuckles for individual breaches of its guidance without being courageous enough to recognise that these are but symptoms of the fundamentally political and evangelical, proselytising nature of the IEA, which exists to promote free market ideology and shrink the state,” he wrote in an opinion piece published on Wednesday.

In 2019, the regulator issued a formal warning to the think tank over a report it published calling for a hard Brexit which it said breached charity law. However, the commission later withdrew the warning after the IEA removed the report from its website.

Earlier this year, the think tank published a report calling for the government to abandon its target to cut net greenhouse gas emissions to zero by 2050 and impose a windfall tax on the renewables industry.

The IEA's Communications Officer Harrison Griffiths said that "It is not true for example that charities cannot be political. It is true any political activity must be aligned with their charitable mission. Oxfam can campaign to relieve poverty, the IEA can engage in public education about the role of markets and institutions of a free society in solving social and economic problems."

"So in simple terms, while Purkis is a knowledgeable and experienced charity law campaigner, on this matter is simply and repetitively wrong, and perhaps should get a new hobby."

A Charity Commission spokesperson said: “All charities, which include think tanks registered with the Commission, must operate in line with their duties. If complaints or concerns are raised with us we will assess those against our published regulatory framework and if needed take regulatory action as appropriate.”