Andrew Purkis examines a future funding model for the Charity Commission.
Can we do better than the present method of financing the Charity Commission? The more one thinks about this, the worse the headache. But a more independent and better-resourced Commission is worth striving for. So have the aspirins ready and here goes.
In the 2015 Charity Finance Yearbook, Andrew Hind, former chief executive of the Charity Commission (of which I was a board member from 2006 to 2010), proposed that the sector should in future pay for its regulator using a sliding scale, so that the biggest pay most, the smallest nothing. His main reason was that the Commission's budget was being cut, and was likely to be cut further, to the point that it could not do its essential job properly.
That is the first big question: to what extent does it matter that the Commission's budget has been cut from £40m to £20m in recent years and is now frozen? And that it could be cut further at any time if the government of the day so decides? In many ways the Commission has done a good job in making money go further by achieving efficiencies and focusing its work more on policing functions.
This is just what influential Conservative politicians such as Francis Maude wanted them to do anyway. Amongst the losers, however, are those charities and members of the public who used to have a person to talk to at the Commission but now find it impossible to get personalised advice; the considerable numbers of the public and charities who do not have internet access or cannot use it; those who value a more substantial advisory, preventative, good practice, policy and research function at the Commission; and those who wanted the Commission to be able to back up its guidance on, say, public benefit with the capacity to be able to monitor and actively follow up its observance (or non-observance). A further loser is the Commision's staff in so far as slashed budgets and the fear of worse to come cause demoralisation, stress and uncertainty.
The second key question about the current funding system is whether the Commission can be sufficiently independent of the government of the day. NCVO have produced a thoughtful report on possible improvements to the way in which the chair and board members of the commission are appointed.
This is one vitally important aspect. But the total reliance on government funding is also a fundamental problem, however appointments are made. This is because the chair and board of the Commission know full well that if they displease the government of the day, the threat of swingeing budget cuts hangs over them. To stick your neck out in those circumstances could be irresponsible folly. This has been part of the background to the loss of an effective independent Charity Commission voice, its very close association with Conservative policies and attitudes, finger-wagging in time with Conservative newspapers and politicians and, for a damaging period, uncomprehending hostility to charities' campaigning role (see my blog Policing charities the Shawcross way, 7 August 2015).
It has long been a matter of pride on the part of successive chairs, boards and staff of the Commission that they were independent of both the sector and the government of the day, owing their loyalty to Parliament and to the long-term interest of the public in a healthy charity sector.
For some years now, the Commission has certainly shown it is independent of the charity sector but has failed to show a convincing independence from the government of the day. To my mind, this is the most compelling long term reason, in conjunction with uncertain, declining public sector budgets, for thinking seriously about a change of funding system.
If the Commission was funded, instead, by a sliding scale of charges on charities themselves, the available funds would be more reliable, and could be bigger. Moreover, the Commission would have the independence made possible without the current threat of financial cuts if they displease ministers.
This would require new legislation, ensuring that the Commission is accountable to Parliament, with a majority of board members not drawn from the charity sector, financed by a requirement on charities to fund the regulator. Since it is in charities' collective interest to have a reliably funded, independent regulator, underpinning public confidence in charities, it may seem to many to be in principle legitimate - in return for the privileges of being a charity - for a portion of charitable funds to be devoted (according to an individual charity's means) to paying for it. These are really powerful considerations. There are good models such as the ombudsman scheme for higher education institutions (called the Office of the Adjudicator for Higher Education), set up by statute, paid for by the sector but found by the courts to be truly independent of it. So why not just go for it?
For a start, there are practical questions. There are an awful lot of charities of very diverse kinds. Collecting money on a sliding scale would be no picnic. How would a sliding scale work? Who would decide the amount of money to be raised and the levy to be imposed? Would the size of endowments, assets and reserves be taken into account as well as income? To what extent should quite small charities pay something, however nominal, and how high should be the threshhold? What would be the sanctions for non-payment and methods of chasing payment? How would this obligation affect the decision of bodies of different sizes (from new and small to a huge Housing Association) considering whether or not to become a charity? Would all those exempt charities such as schools, universities, museums, galleries, Church Commissioners etc that have a different regulator but may benefit from the Commission's work, be liable, or not? Pass an aspirin, please.
Still, let us suppose heroically for now that a workable scheme can be devised. Let us assume that this new venture can be brought together with whatever scheme is set up to pay for the new fundraising regulator. Let us also suppose that time could be found in the Parliamentary programme for contentious fresh legislation to enact a new system of funding for the Commission. What about objections of principle?
Firstly, there is an argument that although it is in charities' interest to have a well funded and independent regulator, it is principally in the public interest, and therefore the public should pay. It will not be in the perceived interest of donors and supporters of charities for some of their money to be spent on a regulator that was previously accepted as a proper responsibility of public expenditure voted by Parliament. Many charities may be outraged by the suggestion that money donated for their cause must be handed over to a regulator. There is bound to be enormous dissension within the charity sector and beyond about this issue, as is already clear from consultations carried out by Directory for Social Change among others.
There is overlap between the Commission's "policing" role to uphold public confidence in charities and the state's role in combatting terrorism and crime. Is this not another reason why charities - and perhaps ministers, too - would prefer state funding of the Commission? A Commission not funded by the state might be thought less inclined to prioritise aspects of regulation in which the state has a security interest. Deep waters.
Secondly, there is a matter of equity. If exempt charities are not included, the substantial demands they still may place on the Commission will be being paid for by others registered with the Commission. More generally, a lot of the Commission's resources are spent on a relatively small number of registered charities that get into difficulties or are miscreant. If the Commission spends disproportionate time on 100 or so statutory enquiries per year, is it fair that all the charities who have been good as gold have to pay for them? Is it fair that completely secular charities should help pay for the regulation of sundry religious charities, and that money donated for particular religious purposes should be diverted to regulating the multitude of charities with opposing religious or non-religious purposes?
Thirdly, if charities with significant money and staff were to be paying for the Commission on a sliding scale, would their agendas over time influence the Commission unduly, at the expense of the much larger numbers of charities who have little money and no staff at all? It has always been important to the Commission (and perhaps to many Parliamentarians) that the Commission, unlike NCVO, Acevo et al, is not dominated by the perspective of charities with staff and significant money who make the most noise. The Commission has always been acutely conscious of the multitude of tiny charities out there, doing good below the radar, many of whom have never heard of NCVO or Acevo but who relate to the Commission. Public funding has enabled a different culture on the part of the Commission from that of the sector representative bodies that speak mainly for the minority of charities with significant incomes and staff. Would sliding-scale sector funding of the Commission tend to undermine that balanced overview of the whole sector?
There is another option, which is to graft payment by charities for some Commission services onto the current model. The danger here is that charities get the worst of both worlds: the fundamental lack of independence and lack of stable, sufficient core funding of the current regime, as well as the arguable unfairnesses and distortions of charities paying for aspects of regulation.
I promised you a headache. It all depends on the relative weight you give to these different considerations. Which is the least worst option? An independent, strong, effective Commission would, for the foreseeable future, require payment by the sector on a sliding scale, despite all the difficulties. That is an important prize to many charities. But is it worth the pain?