When William Shawcross was appointed as chair of the Charity Commission three years ago, he told Third Sector that charging charities for regulation was "attractive in theory, but incredibly hard to work out in practice. I can’t see many charities welcoming it. I think I would argue against it."
Three years on, he has concluded, after successive cuts in the commission’s budget that are likely to continue in the years ahead, that it cannot do a proper job if it continues to rely solely on funding from the Treasury. He intends to publish charging proposals for discussion before Christmas and to have a decision within a year.
The system he says he has discussed most often with charities is an annual fee paid to the commission by charities on the register. It would be negligible for the vast majority of small charities and would rise proportionately with size. But other systems have been canvassed as well, including top-slicing Gift Aid or the overall tax benefits received by charities.
Top-slicing would presumably mean HM Revenue & Customs diverting to the commission a small proportion of the tax benefit due to each charity. The underlying principle is that taxpayers generally would be footing the bill, with their current contribution redistributed rather than increased and charities losing out.
Annual fees on a sliding scale would be seen by many as a tax on donors, although in many cases, of course, charities receive their income mainly from other sources. There is a lively debate going on about which approach is right in principle.
But whatever the formula, at least one part of Shawcross’s statement from 2012 remains true: not many charities will welcome charging. He will have a battle on his hands and his popularity in the sector will suffer. But, as he told Third Sector recently: "This is not a popularity contest – what matters is whether the commission is an excellent regulator."
But even those who vehemently oppose charging are beginning, like Shawcross, to resign themselves to the inevitable. Barring accidents, a government is in power for the next five years that is going to cut public spending and attack the deficit, and the commission has been told by the Treasury that it won’t be a special case. It is also unlikely that Shawcross would be using such definite language about charging if he was not confident of the backing of ministers.
The crucial question will be whether the money raised by charging will come as well as or instead of Treasury funding. This is inevitably where the hard negotiation will take place. There needs to be a cast-iron agreement that public funding will continue at an agreed minimum level so a sensible, proportionate and, above all, stable charging system can be devised.
If a charging system took the pressure off the commission, however, it would in turn give new life to another passionate debate – whether more of its resources should be transferred to the provision of help and advice for charities, which has been truncated recently. But that’s another argument for another time.