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Charity finance director attacks Government's loans

By Helen Warrell, Third Sector, 14 February 2007

The Treasury: publishing its review of the third sector later this month

A finance director has accused the Government of being "obsessed" with loan finance and failing to understand the voluntary sector.

Chris Harris of Action for Blind People made his comments to Third Sector in advance of the publication of Access to Finance, a government report on loan finance in the third sector.

The report is a supplement to the Cabinet Office and Treasury review of the sector, which will be published later this month. The report will cover recent changes in charities' use of finance.

Harris said: "I think the Government has an obsession with making the charity sector look like the private sector. There seems to be an idea that, if charities could borrow in the same way that companies do, they would be able to do an awful lot more. This has led the Government into making mistakes, such as Futurebuilders.

"But ministers cannot get round the problem that we are the not-for-profit sector, and the majority of what we do doesn't give us enough capital to pay off a loan."

Research on the review started in November. Focus groups were held across the country a month later.

Richard Gutch, chief executive of Futurebuilders, denied that loan finance had become a problem.

"The sector is taking on loan finance more and more, so it would be good to see the Government providing more money earmarked for loans," he said.

Paul Palmer, professor of voluntary sector management at Cass Business School, said the review could take a number of routes. "The Government could be looking at finance on the basis of wanting to engage with the sector and investigating how it could save money," he said.

"The alternative is that ministers have accepted that full cost recovery and the Compact are not working and that the sector is subsidising public services."

A spokeswoman for the Charity Finance Directors' Group said the umbrella group was "disappointed" not to have been consulted for the Government survey.

"We were involved in the wider review of the third sector, but we don't know how much of our response will have been included in this finance review," she said.