Money is not the issue when it comes to charging for Charity Commission

January 23, 2018 at 08:30

The government should be congratulated on its decision to increase the Charity Commission’s funding by £5m per year (a 20% increase) over the near future, whilst it considers what it is going to do next. The departing Chair of the Charity Commission, William Shawcross, also deserves credit for getting the government to puts his money where his mouth is.

However, this puts into sharp context the rhetoric that has been deployed over several years that the Charity Commission has to be paid for by charities, because of the pressures on the public finances. In the years following austerity, it has been reiterated that the government simply cannot afford to fund the regulator properly and that some activities will need to be paid for by the charity sector.

Is money really the problem?

In recent evidence to the DDCMS select committee, Mr Shawcross said that the previous Chancellor, George Osborne, had said that the Charity Commission had to look at charging for regulation to “relieve the burden on the taxpayer”. Mr Shawcross said that “I think in the end the only way that the charities regulator can be funded is by the charities themselves”.

But this decision to give a £5m annual uplift, even if on a temporary basis, shows how this argument doesn’t stack up. Ultimately, £5m (even £10m or £15m) is just pocket change in a budget for 2018-19 which is £809bn. £5m is just 0.00000618046% of the total government budget – to be exact.

We aren’t just talking about change down the back of the sofa, for government in budgetary terms, this funding is like finding a penny on the street and putting it into a charity box.

Enablement is just a much a part of regulation as anything else

The latest argument to be put forward is that “enablement” to help trustees to do their job is not something that the government should pay for, only core regulatory functions should be funded by the taxpayer.

This argument doesn’t stack up very long when you just ask a very simple question: Surely part of any regulator’s core functions is to get people to comply with the rules?

Enabling trustees to understand the rules is about ensuring compliance and better protecting the assets of charities. Protecting charitable assets is a “core regulatory function.” In fact, it is one of the Charity Commission’s own strategic priorities according to its Revised Regulatory Statement.

The Charity Commission isn’t strengthening enablement functions out of the goodness of its heart, it is doing it because there is a distinct regulatory purpose behind it.

This division between helplines for trustees on the one hand, and statutory enquires on the other, is simply a myth.

If money isn’t the issue, what is?

This issue isn’t money, therefore, because we know that the government can afford it. It also isn’t whether some things are “luxuries” that should be paid by charities, because as we can see enablement is core to the work of the Charity Commission.

Charging will make sense when it answers the question: Beyond having more money (because we know government can pay), why would the Charity Commission be a better regulator because it is funded by charities?

Once you get into this territory, things become more complex.

Some would argue that the Charity Commission would become more responsive to charities if we paid. Others argue that its governance could be improved by having more charity representation which would be secured by payment (although this option hasn’t been put on the table and Mr Shawcross had previously rejected such changes). Some would say that the public would increase its trust in the sector, if it knew we demonstrated our support for regulation by paying for it.

These are fair arguments.

On the other hand, you could argue that paying for something doesn’t give you more control over it. Anyone who pays for a utility like electricity or water knows that paying for something doesn’t necessary get a better service. In terms of governance, is paying for regulation ever going to stop government from intervening in the sector? Charities are too politically sensitive to be left alone to look after themselves. I also doubt that the government is going to give up control over the Chair.

Finally in terms of increased public support, yes, some members of the public may like it. But some may also raise concerns that charities have bought control of their regulator and that now they are “licking their own lollipops” as one focus group attendee said to us. You can certainly bet that if the Charity Commission does something that the media doesn’t agree with, that is the line of attack that they will use on the Commission. What impact will this have on the perceived independence and effectiveness of the Commission?

Charging is a gamble

Charging is a gamble. The risks to the reputation of the Commission and the sector, are unknown. The financial sustainability of the Charity Commission may also fluctuate as the financial fortunes of the sector change.

This doesn’t take into account the increased cost and time lost focusing on getting people to pay up. Just look at the Fundraising Regulator.

It already feels like we have spent too long talking about this topic as it is.

There isn’t much wrong with the current system of funding, providing that it is adequate, and the decision to give the Charity Commission a 20% budget uplift shows that the government can do that at any time. A grant from government is simple, efficient and more stable.

Charities need to focus on the core issues of this debate and not get distracted.

PS. For some background reading, you can read my speech at the launch of our report on public perceptions of charity regulation back in 2016.

Also, I would recommend this excellent blog from Andrew Purkis and this new report from CAF, which nicely sums up a lot of the points of contention and gives some interesting context.