What is a charity?

Today the Institute of Economic Affairs (IEA) think tank has published a paper that looks at the potentially distorting relationship between charities and the state. Written by Christopher Snowdon it is titled: Sock Puppets: How the Government Lobbies Itself and Why.

Many charities are not what they purport to be. To steal a phrase from the world of social media they are sock puppets. According to the IEA about 27,000 charities are now dependent on the government for more than three quarters of their income and the so-called voluntary sector now gets more money from the state than it gets in donations. The report makes four recommendations of which number 3 says:

A new category of non-profit organisation should be created for organisations which receive substantial funds from statutory sources.

I wrote to Nick Hurd MP the current minister for charities in December 2009 whilst he was the opposition spokesman to raise a similar point.

Could I suggest a rule of thirds? The Charity Commission should insist on the use of some designation such as “Government sponsored body” for any organisation that accepts more than one third of its income from government sources of all kinds but still wishes to be treated as a charity. Once a body exceeds two thirds of its income from government sources it should cease to be a charity and should formally become an agency of the relevant department. It could then be monitored by the NAO and use a .gov.uk web address, etc. Then we would all know what we are dealing with.

To re-iterate:

  • You could call yourself a charity as long as less than one third of your income came from the state.
  • Above one third you could still be regulated as a charity but you would not be allowed to use the word charity when describing yourself and would have to use a designation such as “Government sponsored body”.
  • Above two thirds just call yourself what you are – a part of the government.

Back in 2009 Hurd said my ideas were “interesting” but clearly he has not got very far with bringing transparency into this area of public life.

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7 Responses to What is a charity?

  1. George says:

    Phil

    “Then we would all know what we are dealing with. ” is what you said to Mr Hurd.

    Quite a lot of charity funding comes from local authorities. What the hell do we know that goes on in Ealing Council?

    I prefer the toothless Charities Commission to be given more powers and more staff. I certainly don’t want jumped up politicians or self important senior officers telling a charity how it should be run. They usually haven’t got a clue. Probably apart from Boris they have not had a classical education and their faces glaze over at the mention of the word holistic. Get them to read Aristotle instead!

  2. Chris Gilson says:

    Totally daft idea Phil. As you well know charities can often have variable funding sources across relatively short spaces of time. What if this year a charity has 66% government funding, 68% next year and then 60% the year after? Does it get covered by NAO etc for that one year?

    And calling charity with only 1/3 government support ‘government sponsored’ is disingenuous given that the charity would not be solely reliant on the government.

  3. Phil says:

    George,

    I don’t want to see any real charities nationalised. I do want to see that charities have a strong incentive to raise money from the public. Both limits would be strong incentives for charities.

    Chris,

    It isn’t daft. That is hardly an argument it is just an insult.

    I am happy to discuss where the limits are.

    There comes a point where government sponsorship of an organisation will affect its behaviour and it should effectively declare its interests by giving up the title charity (which the IEA paper endorses). Maybe if you cross a threshold 3 years in a row?

    Maybe the upper limit should be 90% but there comes a point where a charity is no such thing – it is merely an unaccountable arm of government. At this point it should report to the most appropriate minister.

  4. Jonathan Bagley says:

    Above one third, you should cease to be exempt from FOI requests, as “charities currently are.

  5. Jason says:

    Or, maybe government funding could be a on a pound for pound matching basis at maximum, thus no charity could ever receive more in government funds than it receives in direct non-corporate individual donations as the basis point from which matching funds are considered. Keeping it non-corporate and individual donations only eliminates government doing pound for pound matching, if in the case of a corporate sponsored charity, it being more of an industry lobbyist group, not something with charitable aims.

  6. Longrider says:

    There’s a much simpler answer. No taxpayer funding of charities. We decide as individuals where out money is spent. If the charity is any good and provides a valuable service, people will give. If it is just another lobbying group, they won’t. Problem solved.

  7. Pingback: Sock Puppets | Orphans of Liberty

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