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Charity finance policy

Does the Civil Society Strategy deliver for charities?

By Richard Sagar, Policy Manager, Charity Finance Group

Post by CFG

Deemed by government as a successor to the industrial strategy, the government’s Civil Society Strategy, released last week, purports to be a comprehensive vision of how business, communities, charities, and the public sector will work together in the long term, to create a country that works for everyone.

The strategy seeks to achieve this aim by strengthening five foundations of social value:

  • People: enabling a lifetime of contribution
  • Places: empowerment and investment for local communities
  • Social Sector: supporting charities and social enterprises
  • Private Sector: promoting business, finance, and tech for good
  • Public Sector: ensuring collaborative commissioning

The overall aim of the strategy is a commendable one, starting a programme of work to strengthen the role of civil society can only be seen as a positive, but there are many unanswered questions and missed opportunities that need to be addressed before the sector can feel too sanguine about the government’s approach. It’s more a vision of what government wants to see, rather than a credible plan of how it will achieve this.

As one might expect from a strategy of this length there are numerous micro-initiatives announced, but of these there are some which deserve being highlighted as real positives for the sector.

Positive announcements

A renewed commitment to the principles of Grants 2.0 is welcome, as the strategy states they combine a flexibility and accountability, but can also offer ‘additionality’ in philanthropic and in-kind investment. CFG has long called for this approach and the promised ‘revival of grant making’ demonstrates that government has listened to the sector on this issue.

The commitment to beefing up the Social Value Act so that central government procurement has to account for its social value is also a welcome step. But the commitment to explore whether this requirement can extend to planning and grant-making is not concrete enough. We will need to see if the latter actually occurs before we can offer too much praise.

The section on ‘Diversifying funding and finance’ makes a commitment to work in partnership with the Charity Commission and UK Community Foundations to release £20 million extra funding from inactive charity trusts to support community organisations. Additional funds are always a positive, but this figure does not come close to the amounts that are needed.

Where is the money?

While there are positives to be found, perhaps the biggest concern is the lack of additional funding for the sector. The only new funds of note are the £20m from inactive charity trusts to community foundations, and an additional £750k to be spent by government before 2020 to help grow place-based giving schemes to support civic philanthropy (this is the only additional money for the sector given directly by government!). These amounts pale in comparison with the £2bn endowment of dormant assets identified by the Dormant Assets Commission. It is a surprising omission that this does not get a mention. One hopes this will receive more attention from government in due course.

Tax

Perhaps the biggest missed opportunity from the strategy is the section on tax. CFG called on government to be bold and ambitious with the strategy and make the biggest transformation to charity tax since the Victorian era – suffice to say that it did not come close to delivering this. Of the 123 pages of the strategy there were a mere three paragraphs on tax and regulation. Of these, one paragraph contained no new policy measures, just figures on how much the government is already supporting charities through exemptions and reliefs. The only new announcement of note is that government is committing to review social investment tax next year. When one compares this announcement to the over £2bn a year which could be saved by reducing the tax burden on charities (most notably through reducing irrecoverable VAT), this shows an insufficiently ambitious approach, failing to address a fundamental barrier to civil society fulfilling the aspirations set out in the strategy.

Support from across government

A fundamental barrier to the strategy addressing the challenges it rightly points out, is buy-in across government. The Office for Civil Society within DCMS will be leading on much of this work, but to have real impact, other government departments will need to get on board. Most notably MHCLG, who can help determine how local government spends money, and Treasury, to unlock the funding necessary to make change happen.

The principle architect of the strategy Danny Kruger is at pains to point out that this is a conversation amongst equals, and the start of a process not the end. CFG looks forward to having the opportunity to be part of this dialogue and work closely with government to co-create a better operating environment for charities and strengthen the third sector.

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