08/08/2018 11:54 BST | Updated 08/08/2018 11:54 BST

Charging Charities Is Not The Answer To The Charity Commission's Inadequate Budget

A new tax on charities to pay for regulation would be highly contentious

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The Charity Commission has had its budget slashed in recent years from £40 million to about £21 million. Recent safeguarding scandals are yet another example of why a well-funded Commission is so important and how foolish such excessive cuts have been. So how about charging charities to boost the Regulator’s budget instead? The Commission has, in the past, said it intends to consult the sector on some sort of charging, but the Directory of Social Change opposes it and hopes that the new Chair, Baroness Tina Stowell, will continue to think very hard before going down that road.

That is why I have written an open letter to Baroness Stowell on DSC’s behalf. We remind her that charities are not the same as other regulated bodies because they rely on voluntary donations and volunteer effort. Parliament has always wanted to encourage these: the longstanding bargain has been that if you give your time freely and give money for charity, the bill for regulation will be paid by public expenditure, so that it is free to charities at the point of use. A new tax on charities to pay for regulation would be highly contentious.

There are three options for charging charities, and they all have major problems.

First is the idea of charging all charities above a low income threshold, perhaps on a sliding scale. This could liberate the Commission from the tyranny of public expenditure rounds and the financial influence of the Government of the day. But it could undermine the perceived independence of the Commission from the sector: in the long run, those paying the piper will call the tune. The design, administration, and policing of the sliding scale would be a bureaucratic nightmare. And this option involves the biggest tax on charitable donations and volunteer effort.

Second is the levy on just the largest charities. Maybe most of the sector would accept this because they would not pay? And it might start by being a small levy that big charities might feel reluctant to fuss about? Problems here are precisely that most of the Commission’s budget would still rely on Government and public expenditure rounds; there are questions of justice about the donors of some charities paying to subsidise the regulation of others, and about where an arbitrary cut-off point would be; and, once the thin end of the wedge is driven in, no “assurance” can reliably prevent a progressively greater reliance on charging in future, as Chancellors see the scope for off-loading more of the cost onto charities. Moreover, reliance on big charities for funds will raise questions about their influence over the priorities of the Commission.

Third up is the idea of charging charities for specific services or processes. Major problems here are the deterrent effect on those who begrudge the cost, the bureaucratic costs of running the scheme, and the unfairness when misbehaving charities who cause the Commission untold hours of work pay nothing while those seeking particular kinds of necessary consents or registration have to subsidise the work of the Commission.

All of these are contentious, which will make it even more difficult to find the necessary time in the Parliamentary legislative programme.

DSC’s plea to Baroness Stowell is: please don’t dissipate a lot of energy in a distracting debate which will likely go nowhere. Better to focus on building the case relentlessly for a more realistic budget from public expenditure, and better mechanisms through which Parliament might be involved in influencing the Commission’s budget, since the Commission is supposed to be a non-Ministerial public body accountable to Parliament.