Governance, legal and compliance Charity finance policy

We must not see a rush to charging charities for regulation – House of Lords report

There has been a lot of coverage in the sector media of the voluminous House of Lords report on the future of the charity sector. It is well worth a ...

There has been a lot of coverage in the sector media of the voluminous House of Lords report on the future of the charity sector. It is well worth a read, and has a number of positive recommendations based on proposals put forward by CFG particularly encouraging grant making, encouraging commissioners to fund on the basis of full-cost recovery and recognising the potential of tax reform to support the charity sector.

Lords have 'grave concerns' about charging for regulation

But one of the strongest areas in the report are the ‘grave concerns’ that the Committee expressed about charging charities for their own regulation. Here are their concerns from the report:
“It is not yet clear that the Charity Commission has taken full account of the potential impact of charging for regulation. A charge would by definition have an immediate financial impact on charities and their beneficiaries. It may also have an impact on the confidence of the public, who may question why their donations are being used to subsidise an arm of Government. Nor is it clear that the Commission yet understands how charities’ expectations of it as a regulator may change if they are required to pay for its upkeep. If charging is mishandled, there are significant risks for the strength of the charity sector, its relationship with the regulator, and overall public confidence and trust in charities. Because of these issues, we have grave concerns about the Commission proceeding with any proposal to charge charities. We recommend that the Charity Commission makes clear how a charge would benefit charities and strengthen the sector overall. To achieve such clarity, the Commission must be transparent from the outset as to how additional revenue from charities would be spent, and what services would be delivered or enhanced in return. The Commission must set out how it envisages its supporting and enabling role developing or expanding if a charge for registration was introduced.”
This report nicely sums up the points that CFG has made several times in the run up to the long awaited consultation on charging. In particular, no substantive case has been made for charging so far except for comments that other regulators are paid for by those that they regulate.

Lack of parliamentary support highlights lack of a case for charging 

To get these views endorsed by the House of Lords Committee is very important and highlights how little discussion there has been about the impact of charging on the charity sector. If Parliamentarians, who are ultimately responsible for the Charity Commission, are not convinced about charging – then this makes clear the need for the consultation on charging to work from first principles. The option not to charge charities must be part of the consultation.

Governance reform and charging: is this really on the table?

  Worryingly, however, there are some comments in the report on charging being linked with governance reform. We need to get the picture clear on this, before the sector makes any ‘deal’ on charging linked with governance reforms. Firstly, the Chair of the Commission has rejected governance reform. He told the APPG on Charities and Volunteering that he did not see the need for reform as the Commission was accountable enough as it is. As such, there is no ‘deal’ on the table and any deal would need both the Charity Commission and government to be prepared to allow such reform to take place. So there is no evidence that this option exists. Paying, in the hope of governance reform, is incredibly risky and could see charities foot the bill without any change in the Commission's governance. Secondly, as has been highlighted in independent research on this issue, the public are very concerned about the independence of the Commission. If we say that we will only pay for our regulator if we get access to the board or more control over how the money is spent, then this is going to feed perceptions around a lack of independence of the Commission from the charity sector. As such, governance reform in return for charging could be a double-edged sword. NCVO has already produced a briefing on reform of the Commission and how it could make be made more independent. These arguments stand on their own merits, they don’t need to be linked to charging and evidence suggests that it is important for public confidence that they are not linked together. CFG remains sceptical about the proposal for charities to pay for their own regulation, but we are looking forward to an open and full consultation. This report highlights once again the lack of a substantive case that has been made for charging. Charging must not been seen as a done deal. The Charity Commission should be prepared to go back to the Treasury for further funding if a consultation finds a lack of support and evidence that charging for regulation will benefit the Commission or the sector. The charity sector must continue to make the arguments for a well-funded regulator to government but also not accept charging without evidence of how it will improve the charity sector.   « Back to all blog posts