Umbrella body UK Community Foundations has recommended tougher restrictions on private trusts in order to improve effectiveness in its ‘philanthropy manifesto’ for the general election.

The body, which oversees the 48 community foundations spread across the country, has called upon the government to work with the Charity Commission to discourage the establishment of new private trusts.

The group said that such private trusts are “expensive, have increased risk of dormancy and are open to abuse”. It said that examples of private trusts include those set up by wealthy individuals or families, which are managed by themselves, and which are likely to become unused.

UKCF said that foundations with independent trustees, such as Community Foundations, offer an “effective and proven alternative”.

Stephen Hammersley, chief executive of UKCF, said that in the last four or five years, the network has acquired £30m of assets from dormant trusts.

UKCF is also calling for the government to establish a one-off £30m ‘Philanthropy Infrastructure Investment Fund’ which would provide seed capital for projects that release giving. It said there are few sources of investment for philanthropic platforms that enable more giving, unlike the investment opportunities available in the corporate world.

Hemmersley said that this was better done at arm’s length from the government and that it was not good enough for investment in the sector to be only done through “scrimping and saving”.

UKCF are calling on the government to make charitable giving easier and more strategic in order to support the most vulnerable. It is recommending ‘special giving zones’, modelled on social exclusion zones, to prioritise investments in areas of greatest need, making it more attractive and tax-efficient for donors to target their donations into geographical areas.

Hammersley said: “Our evidence is that philanthropists who have created their own wealth are interested in ways of using that wealth to achieve social good beyond traditional grants.

“They want to invest back in their communities to promote sustainable development and to see their investment grow and achieve results beyond the initial sum. Treating donations as a social investment means money goes further and is used in a more sustainable way.”

UKCF also recommends that government continues to use match-funded challenges to promote more local giving. Community First, the incentive programme run through community foundations, created £45m worth of extra money for small charities and community groups last year, using a £15m investment from the Cabinet Office.

NPC’s priority reforms

New Philanthropy Capital (NPC) has also revealed its priority reforms, ahead of publishing a detailed manifesto at the end of the year.

Dan Corry, chief executive of NPC, said that the Charity Commission should redraft its guidance for trustees, to make it more focused on the core mission of the individual charity. He said that having trustees report each year on the impact of the organisation on its core mission and how it plans to improve, would be a “powerful nudge to more impact-driven behaviour”.

Corry said the report could form an additional element of the financial reporting each charity has to submit to the Charity Commission, and would help change the culture of the sector by bringing a focus on impact to the very top.

NPC also said the design of commissioning contracts should be reformed, and that the next government should aim to design contracts in a way that attracts more competitive bids from the charity sector. Corry suggested a target of awarding 10 per cent of new contracts to charities and not-for-profit agencies as the prime provider.

He said that such a redesign may include longer-term contracts and a more sensible design of payment-by-results contracts, so that charities providing services to a prime contractor are not landed with the “greatest risk for the least stable income as a result”.

Corry wrote: “The new minister for civil society does not have much time before a general election to oversee major changes in the charity sector. Yet this does not mean he cannot make a start.”