Fears grow over sustainability of funding for the commission

There is growing concern at senior levels in the charity sector that the current method of financing the Charity Commission with a settlement from the Treasury is not sustainable.

The worries have been prompted by a continuing budget standstill just as the commission is being required to take on significant extra responsibilities under the Charities Act 2006.

The commission has to compete for Treasury funding, but as a non-ministerial department it does not have a minister to argue its case. One suggestion is that it might have its budget set by Parliament, like the Electoral Commission.

Two senior figures familiar with the workings of the commission agreed that there should be a wide-ranging debate about how it should be financed in future.

Stephen Lloyd, senior partner and head of charity and social enterprise at law firm Bates Wells & Braithwaite, said the regulator was "between a rock and a hard place" financially. Geraldine Peacock, chair of the commission until 2006, said it should set up a trading arm to capitalise on its intellectual property.

Lloyd said the commission's new duties of defending cases in the Charity Tribunal, registering exempt charities, issuing public charitable collection certificates and re-incorporating an unknown number of charities as charitable incorporated organisations would take up huge resources. He called for the commission to be allowed to fine late account filers and charge for registering charities.

"In a beauty contest between hospitals, education and nuclear warheads, the Charity Commission is bound to lose out," he said. "The OTS could do more to argue its case, but it is a minnow up against the Treasury machine."

Peacock said the regulator needed to "look at the stars and not the cracks in the pavement" over its future. She agreed it could charge a small fee for registration.

"It could also ask harder questions, like 'what is the added value of you becoming the 150th charity doing the same thing?'" she said.

The commission should ideally be completely independent from government to avoid being "fettered", she added, but should at least have a mixed funding stream. It should approach government with a list of what needed to be done instead of accepting a set budget and then deciding what to do with it, Peacock said.

Andrew Hind, chief executive of the commission, said: "Last year's funding settlement creates clear difficulties in resourcing our activities over the next three years. Although we can fund our core regulatory responsibilities, we are having to cut some valuable activity."

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