Charging charities for regulation isn’t inevitable but it is risky and inefficient

November 4, 2016 at 08:44

 

The hookey-cokey of the Charity Commission consultation on charging charities for regulation continued on Wednesday, with the Chair of the Charity Commission once again saying that he viewed charging for charity regulation as ‘inevitable’.

A consultation that was supposed to begin at the start of the year, then during the summer has now been moved to the start of the next year. The current ‘informal consultation’ is beginning to seem more like an effort to make the charity sector accept that charging for regulation is going to happen, rather than an impartial listening exercise. It certainly isn’t good practice.

Let’s be clear, charging for charity regulation isn’t inevitable. No good reasons have been put forward for charging so far, only contexts.

What they say to justify charging (so far)

“The government doesn’t have any money to pay for regulation.” This isn’t an argument. Government spends over £760bn a year on public services. It just isn’t credible to say that it can’t spend a few million extra on regulating a sector which generates billions to deliver services for public benefit. This is a reminder that we need to make a better case to government around about the importance of charities and the need for good regulation. The government has also dropped the deficit target in this Parliament, so the purse strings have already been loosened slightly.

“Services at the Charity Commission need to be improved or increased to meet demand.” Anyone that has ever had to ring up a utility company or a private business knows that paying for something doesn’t mean that it is better. And demand for services is an argument for more money rather than charging. The Charity Commission is in the midst of a digital transformation and wants to improve its services, these are practical steps to achieve service improvement. Charging as a method of resourcing the Commission, won’t make any difference.

“The Charity Commission needs to be more accountable.” This is sometimes expressed by charities that want to change the Charity Commission and think charging is the way to do it. Not only was this shot down by the Chair of the Charity Commission on Wednesday, who said clearly that he believed that the Commission was already accountable enough, but any regulatory changes linked to charging would likely call into question the independence of the Commission. This would undermine confidence in both the regulator and the sector. If charities want to make the Charity Commission more accountable, then they should make these arguments on their own merit. Linking it to charging hurts the sector.

But there are plenty of arguments on charging doesn’t work

While none of the contexts given above justify charging, there are a number of reasons why charging isn’t a good idea.

Risk to independence

As mentioned above, charging is a very risky way of raising money. Research commissioned by Charity Finance Group and carried out by the University of Kent found that the public were concerned that if charities paid for the Charity Commission, it wouldn’t be independent. And given the comments made about charging being linked to governance, or ‘demanding a better service’ you can understand why the public may be concerned. At a time when we need to convince the public that regulation is robust and credible, charging is a threat to our sector with no obvious gains.

Inefficient

Charging is also very inefficient. A grant from the government is far more efficient than the Charity Commission having to develop a charging framework, collect charges and then chase people up that don’t pay. The Charity Commission isn’t going to raise £5m or however much it claims it is going to raise to start with. A lot of money is going to be eaten up in building infrastructure for charging, not to mention the time taken up internally in the Commission and charity sector thinking about this issue when arguably we have bigger issues to deal with.

Risk of two-tier system of regulation

Another risk is that charging will lead to a two-tier system of regulation. The Charity Commission says that small charities won’t have to pay. However, will that mean that only large charities that pay will get access to the ‘improved services’? If not, why should the large charities pay for regulation when they are going to receive no benefit? Already larger charities are paying for the Fundraising Regulator, I imagine that many trustee boards will have short shrift with another request for funding. A general increase in government funding would ensure that the Charity Commission remains fair for all and avoids these dilemmas.

Moral case

Finally, there is a moral case to be made. The Charity Commission is paid for out of general taxation, and this is generated through taxing the private gains of individuals and companies. The Charity Commission now wants to pay for itself by charging from the far smaller pool of funds that are purely for public benefit. This doesn’t seem fair. Surely the private wealth should pay for public good? This is better than limited resources for public benefit being used to fund necessary regulation.

We need an open and fair consultation

Either way, the Charity Commission needs to get on with this consultation. It isn’t fair for charities that the mood music for charging continues to be played, whilst they are denied the chance to formally make their views known.

The sector must have the confidence to stand up to changes that we know are not in the best interests of the public or charities. If charging charities for regulation is brought in because the sector is unable to convince the government to pay a few million more for regulation that facilitates so much public benefit, then that says more about the sector’s ability to make its voice heard in the corridors of power than it does about the merits of charging.