Charities should be compensated for Icelandic banking losses and should have their depositor classification reviewed to prevent such problems in future, according to the Treasury Committee’s first report on the banking crisis.
The report argues that “on this occasion only” charities should be compensated, as one of the tests a charity must pass to be protected under the Financial Services Compensation Scheme (FSCS) definition of a retail depositor is “inappropriate for those charities using fixed assets in the course of their work.”
It adds that in light of this, the FSCS should “re-examine the criteria for the classification of charities as retail or wholesale depositors” to “prevent such problems arising in future”. This recommendation echoes the evidence given by CAF chief executive John Low (pictured) to a Treasury select committee inquiry into the Icelandic crisis in February, when he called for charities to have their own depositor class.
The Committee’s report also calls for further statutory guidance relating to the management of charity finances and investments, and clarification of the protection available under the FSCS.
In contrast to the assistance recommended for charities, the report argues against providing compensation to local authorities, as it would be “perverse to reward those authorities who failed to protect their investment”.
“Unanimous conclusion”
John McFall, chairman of the Treasury Committee, explained: "Our inquiry into the banking crisis has taken in a vast amount evidence in the last few months.
“The Committee came to the unanimous conclusion that it is only possible on this occasion to compensate charities and this is what we have recommended.
“At a time when more people than ever are faced with difficult economic circumstances, we believe that it is imperative that charities have access to the funds that were provided to them by the public.”
Low said he was thrilled at recommendations of “this influential committee”, adding: “They have listened sympathetically to the evidence CAF gave and recognised the injustice of the situation.
“Only this week the Prime Minister said it was the government’s duty to help charities at this time. We now need the Chancellor to act swiftly and compensate those who have lost funds.”
Professor Khalid Aziz, chairman of Naomi House and co-chair of Save our Savings, said: “I think it’s a vindication of the lobbying we’ve been doing, and it’s consistent with what we’ve been saying since all this happened 6 months ago.
“We call on the government now to put this into action without delay. It would seem churlish for the government to not take into account the recommendations of such a senior committee.”
