Hang on to your hats: 2015 will be a year of uncertainty for charities

Third Sector reporters assess the direction of travel on policy, campaigning and the powers of the Charity Commission

2015: all aboard for the charity white-knuckle ride
2015: all aboard for the charity white-knuckle ride

The austerity of recent years has meant hard times and many changes for charities and the voluntary sector as they have struggled to do more with less. Donations from the public have held up well, but direct support from national and local government has dwindled, the regulatory regime for charities has hardened, the political environment has become more difficult and surveys have shown an incipient decline in public trust.

Will 2015 be different? Anything could happen, of course, but there are few obvious signs of relief. Public finances are predicted to tighten, despite partial economic recovery, and that will have a knock-on effect on charities. Points of light are a new £40m local sustainability fund from the Office for Civil Society, due to start in March, and a £100m endowment fund planned by the charities minister Rob Wilson. Meanwhile, the environment for charity campaigning will be more restrictive in the forthcoming election campaign, and some observers say there is little sign of change in the harsher attitudes to charities that have emerged recently among some politicians, parts of the media and the public (see Trevor Morris interview, page 33).

Local government finances

Figures from the National Council for Voluntary Organisations show that half of public funding to the sector comes from local government. Central government grants to local authorities are down by a further 10 per cent for the year from April 2015, so the signs are that it will be harder for councils to maintain their support for local charities in that year.

In its Future Funding Outlook, published in July, the Local Government Association said that, despite growth in the local economy, government projections showed continuing funding cuts for local authorities well into the next parliament. It added that the main political parties agreed public spending would contract at least until 2018/19.

"By 2015/16, core funding for local government will have been reduced by 40 per cent in real terms over the course of this parliament, and further reductions are anticipated for the period of the next parliament, whichever party is in government," the LGA report said.

The lobbying act

The act, in force since September, limits the amount that non-party campaigners, including charities, are permitted to spend in the run-up to the general election on activities - known as "regulated activities" - that could reasonably be seen as intended to influence people to vote for particular parties or candidates.

There is anecdotal evidence of self-censorship - of charities being less willing to engage in public debate on matters of political prominence

Simon Steeden, lawyer at Bates Wells Braithwaite

Charities expecting to spend more than £20,000 in England, or £10,000 in Scotland, Wales or Northern Ireland, have to register with the Electoral Commission and account in detail for their spending, which must not exceed £319,800 in England, £55,400 in Scotland, £44,000 in Wales or £30,000 in Northern Ireland.

So far, only five charities have registered, but the charity lawyer Simon Steeden of Bates Wells Braithwaite expects more to do so as the election campaign gains momentum. He has advised between 10 and 20 charities and finds many struggling to decide whether and how they are going to pursue campaigns. "There has been a chilling effect," says Steeden. "It's difficult to gauge the extent, but there is anecdotal evidence of self-censorship - of charities being less willing to engage in public debate on matters of political prominence."

Labour has pledged to repeal the act and consult charities and campaigners about how it should be replaced.

The general election and the future deficit

Because of the recent election of two MPs who defected from the Conservatives to the UK Independence Party, and the rise in the polls of the Scottish National Party after the Scottish referendum, some commentators see the general election on 7 May as the most unpredictable for a generation, and a hung parliament resulting in another coalition government is considered likely.

Some pundits are also calling it the election no one really wants to win, because of the spending cuts or tax increases the new government is likely to have to make. This flows from the fact that the government's plan to reduce the budget deficit - the difference between revenue and spending - has gone into reverse, partly because much of the growth in the economy has consisted of the creation of low-paid and part-time jobs that do not yield much tax revenue.

When the current government came to power in 2010, it predicted that borrowing would be down to £40bn in the current financial year; but in the 2014 Autumn Statement it was predicted to be £91.3bn. Health and education are likely to be ring-fenced in the cuts that are predicted to follow the election, and other government departments are already reported to be preparing to cut their spending to the bone. Charities and voluntary organisations that have or expect grants or contracts from departments other than education or health, or from local councils, are therefore at risk of disappointment.

Political campaigning rules

The Charity Commission has said that, after the election, it is likely to look again at its guidance, known as CC9, on charities and political activity, taking into account how the lobbying act has operated in practice. If it considers that changes should be made, it will announce that and consult widely.

The commission also announced in November that it was setting up a "rapid-response case-handling system" that would follow up swiftly any concerns raised about charities' activities, "giving charities and the public confidence as to what is and what is not acceptable".

Sir Stuart Etherington, chief executive of the NCVO, says: "The guidance strikes the right balance, so the reputational risks of getting this wrong are high for both individual charities and the sector. The Charity Commission is, rightly, on the look-out for breaches."

CC9, last revised in 2007, says charities must not support political parties, but can engage in political activity in furtherance of their objects, providing that it does not become their "continuing and sole activity". But it also says there could be situations where, for a period, a charity "may lawfully apply most, or even all, of its resources to political activity, in support of a charitable purpose".

Some lawyers have questioned whether this is compatible with a ruling from a key 1947 case that said political campaigning by charities must be "ancillary" rather than "dominant". In the light of concern about charity campaigning expressed by some MPs and commission board members, some lawyers are expecting the guidance to be made more restrictive.

The Protection of Charities Bill

This bill was introduced last October in response to requests by the Charity Commission for increased powers. One of its proposals is to extend automatic disqualification of charity trustees beyond those convicted of offences of dishonesty to include those convicted of other offences; it has been pointed out that it is currently possible for someone convicted of a terrorist offence to remain as a charity trustee.

Other measures include more powers for the commission to disqualify trustees for 15 years, allowing the commission to continue with the removal of a trustee after the trustee has resigned, and giving the commission the powers to issue statutory warnings to trustees and to direct a charity to wind up.

In the hearings of a joint parliamentary committee looking at the draft bill, charity lawyers and specialists have variously commented that there should be independent scrutiny of decisions to disqualify trustees and that the commission does not make sufficient use of the powers it already has.

It is not yet clear whether the bill will be introduced to parliament before the election, or if Labour would take the bill forward if it formed or led the next government.

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