Recent years have not been kind to charities. Long-established funding streams have dried up as a result of public cuts and the state’s decision to scale back the support it offers to the most vulnerable in society. The unprecedented levels of political and media scrutiny the sector has faced over its fundraising practices and senior executive pay levels has also threatened to damage public trust in charities and the amount people give.
Few positive sector policies have emerged from Westminster. Much of the government’s focus has been on containing and constraining charities’ activities through the introduction of legislation such as the lobbying act and changing fundraising regulation, or pursuing pet initiatives such as social impact bonds and the National Citizen Service.
The publication of the report by the House of Lords Select Committee on Charities should therefore be greeted warmly by the sector. Finally, politicians in Westminster have taken the time to consider the challenges facing the sector.
The 42 recommendations that have emerged from the hefty 156-page report are more pragmatic than ambitious. The perennial call to allow charities to reclaim the estimated £1.5bn they pay annually in irrecoverable VAT has been ignored. The temptation to call on the government to create a multimillion-pound fund to support charities has also been resisted.
Instead, the Lords committee has sought to work within the confines of a difficult public spending climate and attempted to reform, rather than replace, existing policies and structures. Its approach is more evolution than revolution.
That’s not to say the committee has held back from criticism. There are number of barbed remarks aimed in the direction of government. The Lords’ description of the government issuing "poor consultations and ill-thought-through policy proposals" will ring true with many sector bodies who resisted the Conservatives’ ham-fisted attempts to force through the lobbying act and introduce anti-advocacy clauses into central government grant agreements.
The government’s focus on social impact bonds is quite rightly described by the Lords committee as "disproportionate to their potential impact" and its calls for other financial products for charities to be considered should be heeded.
On the thorny matter of the Charity Commission potentially charging charities for regulation, the Lords committee is unequivocal. The committee says it has "grave concerns" about the regulator introducing a charge and calls on the Treasury to maintain adequate direct funding of the commission, "irrespective" of whether the commission secures funding from other sources. The Lords’ conclusion will only strengthen the resolve of those resisting the levy.
As for the Charity Commission itself, the Lords committee shares the widely held view that the regulator should play a more supportive role in the future and not act just as a watchdog. This, the report says, should involve helping to promote trusteeship and offering more assistance to charities grappling with such difficult issues as mergers.
Not surprisingly, given the commission’s current all-white board, the committee says the regulator should be more mindful of diversity when seeking new board members and should try to recruit individuals with a range of skills and charity experiences and from a broader range of backgrounds. If the commission wants to be taken seriously as an independent regulator of a sector that has diversity at its heart, it is vital that its own board appointments are more reflective of those that it regulates.
Arguably, however, the committee’s most important recommendations for the broader sector relate to the way that funding is currently distributed. The rowing back of grant funding and the growing use of contracts has weakened many local charities and threatened their long-term sustainability. The fact that many public sector contracts are so big that they immediately preclude smaller organisations is unacceptable and needs to change if smaller organisations are going to survive. The government has already committed to improving commissioning practices, but it needs to act, and act fast.
Perhaps the biggest weakness of the Lords' report is how to fund improvement programmes in the future. The report throughout calls on the government, the regulator, sector bodies and charities to do more to address the sector's shortcomings but there is scant detail about where the neccessary funding can be found.
The big question will be what happens next. The government is required to respond to the Lords committee’s report within two months – but, of course, it does not have to implement the recommendations. Under David Cameron’s leadership, select committee recommendations rarely went far.
But will there be a softer approach under Theresa May and her "shared society" agenda? Let’s hope so. Adopting at least some of the Lords committee’s recommendations would leave charities stronger, and would go some way towards showing that the government is on the side of the charity sector, rather than against it.
Andy Hillier is editor of Third Sector