Editorial: The charity that donated to Labour should offer a proper explanation

The Charity Commission has acted with commendable speed over the complaint by shadow charities minister Greg Clark that the after-school club charity Catz Club, trading as Schoolfriendetc, made a donation of £7,500 to the Labour Party in June and paid another £7,500 to attend a party fundraising dinner with members of the Government.[QQ]Within a week, the commission had pointed out firmly that political donations by charities were illegal and the Labour Party had paid the money back. Swift, decisive action by the regulator, then: beyond that, it would be hard to argue that anyone else comes out of this still-developing story with much credit or credibility.

The charity has said the donation was an administrative error, in that it should have come from its trading arm - to which the commission's response was that a donation from the trading arm would have been equally unlawful. If we are to take the charity's statement at face value, it reveals a lamentable ignorance of charity law that could presumably have been dispelled by a quick word with its solicitors. But the crucial aspect of the statement is that the charity was clearly intending, one way or another, to give or pay money to the party, or both. This raises perhaps the most important question: what was it hoping to achieve by helping the party of government and going to a fundraising dinner attended by senior politicians?

Then there is the role of the Labour Party: its fundraising department should surely know that political donations by charities are unlawful, and should therefore take steps to ascertain that its donors are not charities. When the story emerged last Friday, a party spokesman justified what had happened by saying that the Electoral Commission had confirmed that Labour had done nothing wrong in accepting the donation, "which is allowed under party funding rules". If this is indeed the case, then the Electoral Commission may also need an urgent refresher course on the law governing charities and political donations. Meanwhile, Clark has pointed out that, even though the Labour Party is known to be hard up, things have come to a pretty pass if a charity that has received lottery money from the former New Opportunities Fund and a loan from the Government-financed Futurebuilders fund should be using its resources to try to prop up the party in power instead of using them, as intended, for after-school clubs.

Charity Commission records show that at the end of the financial year 2005/06, Catz Club had an income of £853,539 and expenditure of £4,257,633 - an operating loss of a cool £3,404,094. The trustees' report for that first year says that the chairman, named as Anthony Mitchell, was continuing to provide financial support for a programme of starting clubs in deprived and rural areas where local authority funding was often not available. A laudable programme, and one aligned closely with the Government's policy on extended schools. The accounts for the charity's second year, however, are 11 months overdue. Given the news about its political contacts, surely the trustees should do what they had not done at the time of writing and come forward with a full explanation of events. There is the whiff of an unhealthy relationship between this charity and the Labour Party, and it should be dispelled as soon as possible.

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