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Will the Lack of Trust in Charities Make Them Too Afraid to Innovate

30/06/2016 15:47 | Updated 30 June 2016

In many ways the news from the Charity Commission that trust in charities has fallen over the last two years comes as no surprise. Indeed, the reasons given for this lack of trust such as, critical media coverage, fundraising scandals and a lack of transparency about how donors' money is spent are equally unsurprising. But what effect will this latest report have on charities?

There is no doubt UK charities have been having a rough time. Berated for sending overwhelming fundraising requests to elderly people, challenged for being "sock puppets" when they take government cash and have the audacity to campaign about government failings, burdened down with growing scrutiny and regulation - and that's before even thinking about shrinking funds from the public sector. Yes, some charities did bad, but all charities now suffer.

And we can't forget Kids Company. A charity that grew fast and famous on a charismatic leadership, which crashed and burned as its weak governance and poor financial management finally took their toll. Leaving, sadly, many vulnerable young people suddenly adrift without support.

The Kids Company story has been taken as a moral tale: be more cautious, more professional, more tightly governed. And of course that's right, isn't it? Charities have obligations. The people they are helping should not suddenly find the nursing home shutting down, the youth club closed. Public donations should be used with care and prudence.

But there is another way of looking at this. The Kids Company story stood out because it was so exceptional. By comparison to commercial companies, charities and social enterprises have low rates of bankruptcy or other sudden failures. Charity governance and regulation make them far more cautious than the corporate world.

So here's the question. At what point does caution against financial risk create a near certainty that the charity will fail to achieve its social mission?

The UK, like many other countries, faces tough social challenges. Since the 2008 crash, we have seen youth unemployment, pervasive poverty, destitution, homelessness, and a crisis in social care for people who live with dementia, frailty or disability. They join the list of "wicked" problems that have defied attempts at solutions: domestic violence, reoffending, sex trafficking, child abuse and more. As this week we see increased political and economic instability we need our charities and social enterprises to be brave, to take the risks that are necessary to avoid failing the people who need our support.

I'm fortunate that in my day job at Big Society Capital I get to meet and hear from many charities and social enterprises that are thinking differently and taking the right kinds of risk. Charities like St Mungo's who have been supporting homeless people since the 1960's. After years of struggling to find the right kind of accommodation for people who were in transition from living on the street, they worked with Resonance to set up the Real Lettings Property Fund, to access the homes they need. They aim to help up to 600 people over the next 7 years and have expanded the scheme to other areas outside London.

Some use novel routes to social benefit. James Ashwell looked after his mother who had dementia for seven years. It was his frustration at the lack of practical advice and products to help those with dementia remain as independent as possible that led to him setting up Unforgettable, a company locked into a social mission. They now provide practical advice, a support network, and a marketplace for specialised products that help family carers give their relative with dementia a better life.

There are many, many more I could name. Indeed many of our major charities today started with this bravery. It was charities that challenged the establishment and pushed through barriers to achieve universal suffrage, housing and healthcare for the poor, civil rights, and decent lives for people with mental health problems and disabilities. And to follow the Charity Commission point, they were very upfront - very transparent - about what they were doing and how they were going about it.

I understand and respect considered decisions to pull back from new initiatives, especially when that is the only way to sustain their existing support to vulnerable people. This is a risk we really must be careful about. The public would accept such choices.

I'm not for a moment saying we shouldn't think and plan and act at our absolute best. But there is little point in our existence unless we can achieve change for people we are here for. The biggest risk of all is failing the people who need us.

Let's urge charities on, let's give them the room to breathe, and our support to take courage.

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