William Wallace writes: Charities and public trust


Charities have been in the news this summer: first the ‘Olive Cook’ affair, raising the question of over-aggressive charitable fund-raising, which led to an active Daily Mail campaign, and then Kid’s Company, a charity which had run repeated deficits, depending on large cheques both from government and from major donors to bail it out, with trustees who seem to have been in awe of a charismatic chief executive.

Liberal Democrats watching the news to catch coverage of Tim Farron’s conference speech will have heard about the publication of a report on abuses of charitable fund-raising, which proposes a tougher regulatory regime.  I was one of the four members of that committee, at some cost to my summer.  Some had dismissed the Daily Mail campaign as another right-wing attack on progressive good causes.  We heard fund-raisers and major charity CEOs admitting that they had failed to monitor how the commercial agencies they employ handled telephone canvassing, that they had ignored the telephone preference scheme, and had overridden data protection in swapping contact details on donors.

A Charities Bill is on its way through Parliament, concerned mainly to make it easier for charities to invest in social enterprises.  Liz Barker, who has a wealth of experience and expertise on the charitable sector, has led for us on this, helping to strengthen social housing charities against government proposals to force them to ‘alienate’ resources by selling off houses to sitting tenants.  Since I had been Cabinet Office spokesman in the Lords for the Coalition government, responsible for charities amongst other issues, I also took part.  Colin Moynihan, who had been struck by the over-representation of privately-educated athletes in the UK Olympics squad, moved an amendment to promote sharing of sports facilities as part of ‘public benefit’, to which I added music and drama. The Independent Schools Council responded by offering a survey of ‘Best Practice’ by private schools with charitable status, jointly with the Charities Commission; so we are engaged in a year-long process that should lead to more effective partnerships at local level.

Charities are big business.  They matter even more when government cuts social and educational spending, leaving others to fill the gap.  But they are not beyond criticism.  ‘Progressive’ charities argued, during the passage of the Transparency of Lobbying Bill, that they should be allowed to go beyond the limits of charity law in political campaigning because they are working for self-evidently good causes.  Some private schools argue that educating their pupils provides enough public benefit in itself, without any wider obligations.  Right-wing think tanks which argue against European cooperation, global warming and regulations on smoking are funded by anonymous donations, which include American billionaires and oil and tobacco companies. The tax advantages of giving to charity have been twisted by some into tax-avoidance schemes.  If we wish to enforce the rules on some, we have to insist that regulations apply to all.

The tax advantages that charities receive deprive the Treasury of over £6bn in revenue; so they have to demonstrate that they are providing public benefit in return.  Neither the Charity Commission, its budget and staff cut back since 2010, nor HMRC have effectively policed this sector.  Liberals instinctively support the type of local initiative and voluntary activity that charities, at their best, provide.  But we need effective regulation to ensure that charities really focus on the public good, and do not drift off into private advantage.  Grappling with the technicalities of charity regulation, Liberal Democrats in the Lords are pushing for a regulatory system that will strengthen public trust and therefore public support, in money and time, for the vital ‘Third Sector’.

* William Wallace has fought five parliamentary elections in Manchester and West Yorkshire. He is a former president of the Yorkshire regional Liberal Democrats.

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  • Dave Orbison 28th Sep '15 - 8:15pm

    Part 1
    As a Senior Case Officer in the Investigations Dept. of the Charity Commission between 2008-2010, I was on the inside track of the Commission. They operated a ‘Wizard of Oz’ approach to regulation. I was so alarmed at by the weak regulation that I made the fateful step of whistleblowing in 2009 with predictable results. I argued the Commission were in breach of its statutory duty.
    See http://www.thirdsector.co.uk/analysis-david-orbison-v-charity-commission/governance/article/1126950 and http://www.thirdsector.co.uk/african-aids-action-founder-eyob-sellassie-given-suspended-sentence-gift-aid-scam/finance/article/1316705
    The biggest cause of ineffective regulation is down to the poor leadership and risk averse nature of executive management at the Commission. They have relied on years of spin to cover this up and make Peter Mandelson look like Alf Garnett by comparison. Management have blamed a lack resources; gaps in the law and of course their own ‘junior’ staff. In fact, anyone but themselves. In my case I identified a trustee who was a fraud and who ran a sham charity. The Commission’s response to overwhelming evidence of misuse of funds, fraud and deception etc. when the trustee decided the best form of defence was attack, was to back down offer just ‘advice and guidance’. They even gave him £500 and three apologies to make him go quiet. It doesn’t end there. I’ll add police obstruction, misleading MP’s and Employment Tribunals including perjury. Sound incredible? There’s more. Following my ‘drumming out’, the Commission claimed they were keeping this fraudster under close scrutiny. Yet in 2014 this fraudster embarked committed gift aid fraud in excess of £105k and was found guilty in the Old Bailey in October 2014. Needless to say this was all in connection with the sham charity. By the way this was a HMRC investigation obviously. In all nearly £500k wasted not due to a lack of funds but due to management incompetence.

  • Dave Orbison 28th Sep '15 - 8:29pm

    Part 2
    Between 2000 and 2010, using the Commission’s own figures, the Commission received increased resource year-on-year, yet used their regulatory powers on a diminishing basis. In 20012 the Public Accounts Committee and NAO rightly found that in terms of regulatory compliance ‘the Commission was not fit for purpose’.
    Prior to joining the Commission I held a senior management position in manufacturing. On joining the Commission I was immediately struck by the talent, commitment and drive of staff within Compliance. It takes a special kind of incompetence to undermine and lose committed and skilled staff. But the Commission did it. In Compliance in 2010 only 8% of staff felt safe to raise concerns with senior management. Sometimes the solutions are under our very noses.
    Footnote- Needless to say despite being fully vindicated on all points – not so much as an apology did I receive from the Commission. Whistleblower becomes the victim – familiar story I know.

  • Bill le Breton 28th Sep '15 - 8:34pm

    There also needs to be a hard definition of ‘public benefit’.Do you agree, William? How can we assess whether an organisation deserves charitable status unless it can demonstrate that it produces public benefit?

  • Little Jackie Paper 28th Sep '15 - 10:16pm

    I have to admit (having worked for charities) that in my darker moments I do wonder whether we need charity status at all. I don’t take pride in it – but my own view is that as a sector the whole idea of, ‘charities,’ and what it means to be, ‘charitable,’ needs a serious rethink.

  • Seen the issues raised by Dave Orbison from the other side. Raised issues with the Charities Commission about a charity of which I became a trustee, obviously raised internally first, but as an outsider to the club was largely ignored. The Commission basically said alleged fraud is not our problem. I had no choice but to resign. After the charity was bled dry, it folded. All very sad.

  • Should have added I am now a trustee of a brilliant well run charity providing respite care. The difference between the two is stark.

  • William Wallace. I agree with most of what you say. However I disagree with the implication behind this clause “The tax advantages that charities receive deprive the Treasury of over £6bn in revenue;” The use of the word “deprived” is unfortunate. It is better to think of it as the Treasury using tax relief to stimulate giving to charitable organisations. The effect of this is considerable and means that many organisations are receiving donations for providing services that might otherwise have to come directly and completely from public funds. Nobody gives just to get tax relief. A higher rate taxpayer’s £1000 gift may only cost that person £500 in fact but it is £500 more into public services and it still costs them £500.
    Charities include universities, museums, further education colleges and not all are regulated by the Charity Commission. Universities are regulated as charities by the Higher Education Funding Councils. One doesn’t hear many complaints about university fundraising practices which suggests to me that the Funding Councils may be more effective regulators that the Commission and/or that universities have some better fundraising practices.

    Like other contributors, and having worked around the charitable sector for all my professional life, I am also aware of dubious cases of public benefit. In the last month I have heard of two charities that are essentially not for profit businesses and where I would question whether they merit charitable tax relief. They might qualify as social enterprises which don’t enjoy tax benefits in the same way. Many private schools provide scholarships to those who can’t afford the fees – and thus justify some public benefit. Others make no effort at all. I doubt if there is much interest in the present government in looking too closely into these matters.

    John Kelly works as a fundraising consultant to not for profit organisations and writes in a private capacity.

  • Laurence Cox 30th Sep '15 - 3:27pm

    You illustrate the problem with one sentence “Charities are big business.” It is because people who run some charities think this way, that we are seeing the problems with donors’ details being sold on and, I suspect, people being promoted by charities because they are good fund-raisers, without any consideration of their methods used to raise funds. When these people reach the top of charities, then they assume that their methods are right because “everybody does it”. If there is no-one to say “it may be legal to require a donor to opt-out of having their details sold on, but is it moral to do so?” then the charity is no more than a commercial business.

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