Policy, campaigns & research, Policy

Are we talking about the right approach to fix the Charity Commission’s budget?

An independent and well-resourced Charity Commission is crucial for the well-being of the charity sector. But the Commission has seen its budget slashed from £40m to around £21m. The government recently made £5m in additional funding available, but we still don’t know whether this increase is permanent – and further cuts could well be on the horizon. As a result, there is a debate about charging charities to plug the gap – which DSC opposes.

What solutions are on the table?

The leading policy idea which could be put out for consultation soon was said to be a levy on larger charities to raise about £7 million per year. But DSC assumes other models of charging may also be on the table. These are broadly:

  • charging all charities some form of levy (e.g. on a sliding scale);
  • charging only some (probably larger) charities;
  • and charging for particular services or based on processes (i.e. submitting reports and accounts).

DSC trustee Andrew Purkis has written an open letter to the new Charity Commission chair Baroness Stowell to explain why removing the burden from the Exchequer and putting it more onto charities (and by proxy, on charitable donors) is not only wrong in principle, but also not the best course of action.

All three charging models come with significant disadvantages

Charging all or most charities a levy would change the bargain between charities and the wider public, and could undermine the Commission’s independence. If charities pay the piper, how many people will trust the piper to play the tune independently in the longer run? Let alone the administrative nightmare of collecting the fees in the first place.

Charging only some (likely larger) charities a levy means that donors to larger charities would end up subsidising regulation for all, while the dependence on government for most of the Commission’s budget remains. But this was one of the main drivers for having a discussion around charging to begin with. Those paying charities could also reasonably expect a bigger say in the Commission’s work – its independence would be at stake again. And will it stop at only charging larger charities? Once the principle is accepted that charities should pay towards their regulation, the walls are breached.

Charging for specific services or processes is changing the bargain between society and charities, who are accustomed to Commission services being available for free when needed. The dependence on government for the Commission’s funding remains as well. Charities may also start to decide that they could do without a product or service. This could drive poorer compliance from those charities that need it most. Enabling regulation could well be unintentionally weakened. Well-run charities then pay into the budget, whereas charities that cause damage to the sector end up paying nothing towards the Commission’s work.

Is the Commission collecting the wrong evidence to build the wrong case?

The Charity Commission recently published its latest research into trusts in charities ‘Trust in Charities 2018’. At the very end of the report we are presented with findings that try to link public trust in charities to the debate around charging charities for their own regulation. People were asked if being told that a small fraction of their donation (less than 1p in £10) would be paid to the Charity Commission to help it regulate charities, would affect their support for charities or willingness to donate to them. Unsurprisingly a vast majority said it would make no difference to them.

The phrasing of the question is quite leading. What results would appear if people were asked about charities taking £1 out of every £1,000 more just to pay for their overheads? Or that a regulator historically funded completely by the taxpayer was now wanting to change that, simply due to government budget cuts? What would people say if they were asked ‘should regulatory subjects pay their regulator?’ Or ‘do you think paying a regulator increases the risk of regulatory capture?’ None of those questions were posed. However, the actual question shows that the issue of charging charities is very much on the mind of the regulator.

What should we discuss instead?

The sector needs a genuinely independent regulator- independent of the government of the day and independent of the sector. DSC has consistently argued that slashing the Commission’s budget in recent years was a short-sighted, counter-productive policy. DSC is opposed to the idea of charging charities for regulation, or indeed any other services provided by the Commission to the sector, and is leading the Campaign Against Charging Charities.

However, we are also aware that the budgetary pressures of Commission need to be resolved. Yet the answer to this must take into the account how the Commission’s budget is debated and decided within government, as well as parliament’s participation in the process. It should not be about what kind of charges we should or should not have.

Further information

Download the open letter to the Chair of the Charity Commission, Baroness Tina Stowell, by DSC trustee Andrew Purkis. Andrew is a former Charity Commissioner and an expert on the Charity Commission’s work and the voluntary sector.

A well-resourced Charity Commission is vital for the work of charities, but we believe that diverting charitable resources to fund the regulator is wrong, on many levels. That is why DSC is leading the Campaign Against Charging Charities. Find more information here.