> This story has been amended; see final paragraph
The government should set up an independent inquiry into the efficiency of the charity sector, restrict Gift Aid to the percentage of income spent on charitable purposes and reduce rate relief on charity shops from 80 to 50 per cent, according to a new report to be published the True and Fair Foundation.
The foundation, run by the philanthropist Gina Miller, was criticised by charities and sector leaders in December for its report on charity finances. The new report has also caused protest from the Charity Finance Group, the Charity Retail Association, the National Council for Voluntary Organisations and the sector chief executives body Acevo.
Karl Wilding, director of public policy at NCVO, said the report, Lifting The Lid, was "embarrassingly poor" and fundamentally flawed in method and analysis. He said: "Its conclusions are a nonsense. No credible policy-maker could possibly take its recommendations seriously. Implementing its proposals would lead to the closure of thousands of the small charities the foundation claims to care about."
The report analyses the profitability of UK charity shops and the amount charities spend on income generation, and makes six recommendations, including an independent enquiry on the efficiency of the UK charity sector, the restriction of Gift Aid to the percentage of a charity’s income spent on charitable activities and the progressive reduction of rate relief for charity shops to 50 per cent.
It also recommends extending the Freedom of Information Act to larger charities, setting a benchmark for fundraising and governance costs as a percentage of overall income and introducing a new format for the Statement of Recommended Practice for charity accounting.
Lifting the Lid is yet be formally published, but a draft version seen by Third Sector says UK charities are "performing poorly" and their shops are far less profitable compared with a leading US charity shop chain. It concludes that the UK charity sector has "a considerable way to go to demonstrate that it is operating as efficiently as possible".
Miller denied on Thursday evening that the report was about to be published. Today she said that the draft version had been sent to The Daily Telegraph, but emphasised that the final version might include changes.
The report says that the 10 largest charity shop chains in the UK typically have a profit margin of 17 per cent, compared with the 83 per cent that Goodwill Industries has in the US. It says that Oxfam’s shops have the highest profit margin out of the top 10 charities (28 per cent) and the disability charity Scope has the lowest (5 per cent).
The fundraising and governance costs of charities also come under examination. The report says that, on average, charities with incomes of more than £1m spend 11 per cent on income generation and governance, but that figures is 22 per cent for the 50 largest charities analysed.
Sir Stephen Bubb, chief executive of Acevo, said: "Charity leaders will object to another dubious report with assertions that bear little relation to the facts and whose recommendations serve merely to undermine the great charitable tradition of our country.
"The True and Fair Foundation's widely criticised and lampooned first piece of so-called research left it seriously low on credibility; one would have thought it would have learned its lesson by now."
Andrew O'Brien, head of policy and engagement at the CFG, said the report was full of inaccuracies and misunderstandings. Robin Osterley, chief executive of the Charity Retail Association, said in a statement: "It is disappointing that once again the True and Fair Foundation has managed to produce a report that contains many statements that fall well short of the truth and are certainly not fair."
> The original story included a link to the draft version of the report, but the final version has now been published and the link updated. The final version includes a number of small changes.