Jay Kennedy: It's wrong to take resources away from bodies that have a social purpose

From the Fundraising Regulator's 'voluntary' levy to plans to charge charities to fund the Charity Commission, the sector is increasingly expected to bear the direct costs of regulation, writes our columnist

Jay Kennedy
Jay Kennedy

Unusually, I drove my daughters to school the other day. On the way, we passed the church hall, which hosts everything from cultural lectures to the Christmas panto. Further into town, we passed by the maritime museum and a bus service for the elderly and disabled. Arriving at the school, we glimpsed the new playground for which the parent-teacher association had been fundraising. Then I stopped at the doctor’s surgery, with its reams of health-related leaflets for patients produced by charities. Returning home, I passed a few charity shops and the community pub (maybe later).

These charities are some of the most important organisations in my community. It wouldn’t be much of a community without them. Across Britain, whether it’s rural Wales or inner London, everybody benefits from charities in some way or another, yet so often we take them for granted or fail to notice they’re there at all.

Charities exist for public benefit, not private profit. That’s why they’re relieved or exempt from a number of tax burdens (such as corporation tax and local business rates). Donors (and hence their beneficiary charities) also benefit from such things as Gift Aid. Settlors of charitable trusts may escape inheritance tax because funds or assets have been transferred from private control for public use.

It’s illogical and counter-productive to tax or take resources away from charitable endeavour to support the state. However, austerity-era cuts to spending and services have also seen this principle come under pressure – for example, some local authorities have been reducing discretionary rate relief.

Worse, charities are increasingly expected to bear the direct costs of a raft of regulatory and other policy initiatives. Faced with a budget slashed in half over the past decade and real-terms cuts in the current spending round, the Charity Commission is expected to commence with a consultation on charging charities for regulation in the autumn.

We need an adequately funded regulator, but charging charities isn’t the answer. Why do policymakers assume that charities can and should bear yet another cost for regulation they can’t opt out of? Even if smaller charities are exempted, why should the funders and donors of larger charities have to support a state agency?

Then there’s the Fundraising Regulator’s "voluntary" levy. I won’t elaborate on the frankly unsophisticated, blunderbuss PR approach it has taken to collecting it, which won’t work and is needlessly causing more reputational damage. Whether or not you agree with the reforms, I think we all have to hope the new system proves beneficial both to the public and to fundraising charities in the long run. Nevertheless, the levy is ultimately a tax on donors, designed to support a London-based bureaucratic regulatory apparatus, with zero financial contribution from the state.

You might say these issues don’t affect most of the charities I talked about above because they’re too small. But it’s the principle, not the scale, that is the issue: it’s wrong for the state to take resources away from organisations that serve social purposes. And donors are conned when made to pay twice – via taxation and their generous gifts.

It’s only right that trustees can see a clear cost benefit for beneficiaries when such taxes, fees and levies are imposed. Ultimately, we’ve got to make the case to the public that every pound spent on such things is a pound that can’t be spent helping people.

Jay Kennedy is director of policy and research at the Directory of Social Change

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