Opinion: Don't let charity become a loophole in the law

The independence of charities is an emotive subject. It is a rallying cry for those who believe it is under threat, who are concerned about things such as mission creep and muzzling and who wonder where control of the sector's fate lies - is it with the public or with the state?

Equally as contentious as the notion that charities are being absorbed into or corrupted by the state is the paradigm of the state transferring its functions to charities. Worse still is the suspicion that charity might be used as a vehicle for the state to offload unwanted assets and liabilities.

For instance, wouldn't it be worrying if NHS hospital trusts were to create charities as places to bury their debts? But some are considering doing just this. From next April, the Treasury is adopting new international accounting rules that require the £16bn 'residual' of the private finance initiative deal - the value of the hospital building or asset at the end of the PFI contract - to be made transparent on NHS balance sheets. An otherwise financially healthy trust could take 10 years to recover from this.

Not surprisingly, Greg Macintosh, a director of accountancy firm KPMG, has reported that some trusts are looking at "innovative structures" to allow them to avoid accounting for PFI liabilities on accounting sheets, including disposal of the asset in charitable trusts. Not a surprising move, perhaps, but not a welcome one either.

It would be bad news, not least because the taxpayer has paid for these hospitals and they should be owned by the NHS and be accountable to the public. The whole point of PFI was that the asset was supposed to come back to the taxpayer at the end of the contract. Under this arrangement, however, billions of pounds of public funds could cease to be legally part of the state. The irony is that the purpose of the accounting rules is to clarify responsibility, not to confuse things.

Anyway, one hopes the Charity Commission will dismiss this out of hand on the grounds that such a charity would be neither independent nor able to demonstrate public benefit. Although the sector has always been a wide field comprising a diverse range of bodies, the integrity of the charity brand would be undermined by allowing charity to become a loophole in the law.

- Nick Seddon is an author and journalist: nptseddon@hotmail.com.

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