Stronger Charities for a Stronger Society (Charities Committee Report)
Baroness Pitkeathley
That this House takes note of the Report from the Select Committee on Charities Stronger charities for a stronger society (Session 2016-17, HL Paper 133).
Baroness Pitkeathley (Lab)
My Lords, I have worked in or with the charitable sector for most of a long working life, and I begin by declaring my interests as set out in the register and drawing attention to my position as president of the National Council for Voluntary Organisations. I was therefore delighted to be appointed to chair the House of Lords Select Committee on Charities. I most warmly thank the members of the committee, many of whom are speaking in this debate, for their commitment, diligence and wisdom. I also express thanks on their behalf to our excellent special adviser, Rosie Chapman, and our staff, Matt Korris, Simon Keal and Gabrielle Longdin. Their skill and professionalism were much valued by us, and thanks particularly to Matt Korris as he took over at short notice following the illness of a colleague. Our thanks are also due to those who submitted evidence, appeared as witnesses and hosted our visits outside Westminster.
The committee managed to reach consensus after much robust discussion, and we came up with 100 conclusions and 42 recommendations. I think few of your Lordships will disagree with the statement at the beginning of our report:
“Charities are the eyes, ears and conscience of society. They mobilise, they provide, they inspire, they advocate and they unite”.
The timing for the committee was significant. It was recognised that we are living in a time of profound economic, social and technological change and that the environment in which charities work is altering dramatically. In addition, some high-profile failures in the charity sector had eroded trust and, at the same time, newspapers published a series of reports alleging that some of the best-known charities in the UK used exploitative and unethical fundraising methods, so it was the right time to set up a committee which focused on the charitable sector. I have been told many times that the report—we called it Stronger charities for a stronger society—is an important milestone for the sector.
In the limited time available, I can give only a flavour of our 42 recommendations, but as the Government will respond to the debate, I will concentrate on those recommendations to which we hope to achieve a response. Those are, for example, that better government consultation with the sector is vital—it must be improved—that commissioning and relationships within the contract culture must also be improved and that more encouragement should be given to consortia in the bidding processes. A consultation should be launched on employers giving time off for trustee duties. The impact of devolution and of Brexit on the charitable sector have scarcely been considered and must be addressed.
We also comment on the Charity Commission, itself going through major changes at present and considering whether to charge charities to part-fund its services. We raise concerns about that and emphasise that if it goes ahead, we need to be clear what the benefits for charities would be and must ensure that no burden falls on small charities.
Your Lordships will know that the normal process is for the Government to respond within three months. As the general election intervened, we understood that there would be a delay, but I do not think we could have anticipated a delay of almost 10 months in the Government’s response, for which the newly appointed Minister apologised when the response was eventually produced. I am bound to say that when committee members read it, their most frequent reaction was, “What on earth took you so long?”. The Government’s response to the committee’s inquiry addresses its recommendations point by point, it is true, but most recommendations are dealt with only briefly.
There is general recognition of the importance of the charity sector, although little reference to the specific challenges it faces in the current economic and fiscal climate. It acknowledges that the sector is growing but not what is driving the growth. Increased demand for services and support from charities is mentioned only in passing, while our witnesses constantly emphasised that charities are being asked to do more with fewer resources, and the problem of getting even their core costs funded.
The response lacks a sense of co-ordination regarding how the Government, and particularly the Office for Civil Society, plan to respond to some of the challenges and opportunities the sector faces. There are repeated commitments to consult or work with charities, sector bodies and other stakeholders to consider how to strengthen charities, but no reference to how those commitments might be monitored or followed up, or the likely timeframes.
Overall, the response is largely focused on actions that the Government have already taken or are considering through a proposed civil society strategy. There is little or no detail as to the concrete steps the Government intend to take to enact or support the recommendations they agree with. Absent also from the response is a sense of the Government’s priorities for the charity sector and how, for example, they envisage charities’ role in civil society might change, and their increasing role in the delivery of public and other services.
I freely admit to disappointment in the government response, but I take some consolation from the recent announcement that the Government are preparing a civil society strategy. In her letter to me accompanying the response, the Minister acknowledged that the report will be,
“extremely helpful as we set the direction of our work preparing for the strategy”.
I am sure the development of a new strategy is the Minister’s own idea, but I feel that the Select Committee I chaired can take at least some credit for making her aware that better understanding of the charitable sector and the problems it faces is vital if it is to fulfil its potential.
The Minister goes on to say that this is an important opportunity to improve partnerships between sectors and local communities to build a stronger and fairer society, and that the strategy will recognise the value that civil society brings and help to unlock its enormous potential. Amen to that. But can the Minister update the House on the proposed strategy? What is its timetable? How will it be consulted on? Will some kind of guiding or advisory body oversee it? How will the sector be represented and consulted? I cannot emphasise too strongly that no strategy, however well intentioned, will be of any value at all unless put together with the sector, which in turn represents the needs of the beneficiaries of charitable services, who know about their own needs and what services are required to meet them.
I know that today, the Minister, for whom I have the greatest respect, will promise this co-operation, but I am afraid that the Government have form on this. Their decision not to amend the lobbying Act in the way my noble friend Lord Hodgson recommended—I call him my noble friend, although he sits on the other side of the House—which most charities thought was the best way to safeguard that precious function, being the voice of their beneficiaries, was a great disappointment to charities. The Government have promised to work with charities to help them understand the legislation and give them the confidence to campaign. As yet, I regret to say, we have seen no sign of this, so my confidence in their commitment to partnership is a bit weak.
We also made recommendations about the Charity Commission, and I was grateful for its response—also recently received—in which it accepted most though not all of my committee’s recommendations. However, here I must raise an issue of particular concern to the charitable sector. The current chair, with whom the committee had extensive contact during our inquiry, is standing down at the end of this month. In due course, I am sure there will be opportunities to pay tribute to William Shawcross for his sterling service to the commission. The process of appointing a successor has been going on for several months, and it is understood that the names of suitable candidates were approved by the DCMS at the beginning of December and passed to No. 10 some four weeks ago at least. Still no announcement has been made. This is extremely undermining for the commission’s staff and, of course, unsettling for the whole sector, as this is a most significant appointment for charities.
I have two questions to ask the Minister about this, and if she is not able to answer today I hope she will get the relevant information and write to me with all dispatch. Is the delay simply because the appointment is seen as insufficiently important to come to the top of someone’s in-tray, at a time when, admittedly, No. 10 has a lot else on its mind; or is some kind of political influence perhaps being exerted? I am sure she would agree that this would be highly inappropriate in the case of an appointment which must, above all, be totally neutral politically. When will a decision about this important post be made?
So I have had a few moans about things and I have no doubt that my colleagues will have a few more, but there have been many positive outcomes since the report was published.
Many of our recommendations, including on governance, were for the sector itself and did not have to wait for a government response. Good governance is essential to a strong charity sector. Charities need robust structures, processes and good behaviours in order to deal effectively with their beneficiaries. We call for new efforts to provide training and development for trustees and recommend that charity boards should be more engaged in self-reflection, checking out how they operate, doing appraisals, examining their behaviours and measuring their impact. We urge infrastructure bodies to identify any shortcomings in the provision of such training and advice and do more to raise awareness of what does exist.
We were very concerned about the lack of diversity on many trustee boards. Of course, boards should reflect their beneficiaries in terms of ethnicity, age and background but when the commonest way of becoming a trustee is still because someone asks you, boards are almost bound to be limited to the same kinds of people. As we know, charities are concerned about the supply of trustees. How do you get them? Where are they going to come from in the future? We need to emphasise more that this is a two-way street. You give something as a trustee but you get something back. It may be something for your CV; recovery from illness or bereavement; learning a new skill. These are perfectly valid reasons for becoming a trustee but those recruiting should be open about this.
My committee felt it was most important to do a lot of work on increasing the sector’s self-confidence—to give acknowledgment and recognition. I am therefore very pleased that the report has been so well received by the sector. In a pretty difficult environment for charities, the consensus achieved seems to have been particularly helpful. Several commentators have said that it is, in effect, a road map for strengthening the sector and I very much hope that is how it can continue to be used. I am delighted to say that the sector has taken up the challenge and is using the report to help further the recommendations. NCVO and ACEVO convened a group of membership organisations and set up a series of working groups to see how this joined-up approach can help us make the proposals in the report a reality. They include governance, diversity, leadership, campaigning, public services and volunteering.
The willingness of the charitable sector to work together, to examine itself and put its own house in order, is a great example which should be recognised and valued. The sector itself knows that trust in charities took a knock in recent years; it may be getting better but it can never be taken for granted. Levels of probity and transparency must be constantly monitored. Charities’ confidence in themselves is important in this regard, and I hope the report has increased that. I know that we shall hear from other contributors to this debate about their own concerns, so I will conclude with a quote from the CEO of the Big Lottery Fund, who told us that:
“You cannot run the Big Lottery Fund without, every morning, being overwhelmed by what people in this country achieve in the charity sector. It is glorious and a wonder”.
I am sure we would all agree
Charities face greater operational and environmental pressures than ever before but their principles are enduring and they have always helped society through periods of upheaval such as the one we face at present. I have no doubt they will do so again, but they must be recognised and supported in the vital work they do. I beg to move.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I was not a member of this Select Committee, although I was privileged to be able to give evidence to it. The report is a thoroughly professional piece of work which reaches many sensible conclusions. I congratulate the noble Baroness and members of the committee on their work. I note that Tracey Crouch, the Minister responsible, has given a “positive response”—the phrase used by the noble Baroness in her introduction—and I hope that follows through to the implementation of the recommendations.
I will focus my remarks on three areas where I particularly support the committee’s conclusions. The first is on the need to ensure proper governance of individual charities and, in particular, the need to ensure that bodies of trustees or boards are regularly assessed and refreshed. In the research which I carried out for my own report on the sector five years ago, it became clear that, too often, the presence of too many long-serving trustees had a deadening effect on the operations of the charity. In my view, the committee is absolutely right in its recommendation of a maximum of three three-year terms for trustees. However, this should not be a statutory requirement, as the charity sector, above all, does not come in one size; comply or explain must be the right way forward. I look at the noble Lord, Lord Shutt of Greetland, as he has raised this concern with me.
Secondly, I very much support the committee’s comments on charity mergers and amalgamations. It can be argued that, with over 150,000 registered charities, there are already too many, but it would surely not be right to unduly restrict the formation of new charities, many of which are established in the aftermath of an appalling personal tragedy. We should instead encourage the long tail of longer-established and, too often, semi-moribund charities to wind up, merge or amalgamate. A decision to do this is often seen by trustees as a sign of weakness or failure. In my view, they should instead see it as a sign of realism and strength.
My third issue concerns the report I prepared for the Government on Part 2 of the lobbying Act on third-party campaigning, to which the noble Baroness referred. Of course, it is immensely flattering when a distinguished committee of your Lordships’ House recommends the implementation of one’s report, and it is very tempting to roll over and have one’s tummy tickled. However, I say to my noble friend on the Front Bench that I am disappointed that the Government have decided not to proceed with the implementation of the report, particularly since they seemed in favour of it initially, judging from the remarks of the Ministers then responsible for this issue, my noble friend Lord Bridges of Headley in this House and John Penrose MP in the other place.
We seem to have become snagged on the single issue of the “intent test”: what was the purpose behind a particular action of a third party? On the one hand, the Government appear to think that the protections offered by the Representation of the People Act are inadequate, though it has been in force now for over 30 years and there do not appear to have been any particular problems with it. On the other hand, third-party campaigners are nervous about the potentially capricious, and perhaps ex post, interpretations of a particular activity they may have undertaken. If this is the problem, there are still ways forward if we wish to follow them. The Electoral Commission could produce a statutory test covering the intent test. That would obviously have to be approved by both Houses of Parliament via statutory instrument but, once approved, compliance with it would give legal protection to any third-party campaigner. If that is not possible, the Electoral Commission could itself undertake that where a charity complied with CC9—the Charity Commission’s guidance on political campaigning—the Electoral Commission would not seek to bring a prosecution. This would at least bring legal protection to the charity sector. One way or the other, I hope the Government may be persuaded to reconsider their approach to this issue. The present position is not satisfactory for the Government, the Electoral Commission, the Charity Commission or, indeed, third-party campaigners as a whole.
I shall focus the rest of my remarks on an issue which does not form part of the committee’s report but which I think needs some government attention—the Royal Albert Hall. It is a complex matter but shows how the existing legal framework is less effective than it should be. As regards the background, noble Lords may be aware that the Albert Hall was built in Victorian times and funded by public subscription. The corporate structure is complex but includes a registered charity. Those who subscribed to the construction costs were given in return a seat or seats enabling them to attend events in the Albert Hall in perpetuity. A difficulty has arisen because individuals or individual families have acquired blocks of seats and, it is alleged, have begun to attempt to sell the seats at prices not necessarily linked to their face value. This difficulty is increased where the individual purchasers are themselves directors or trustees of the Albert Hall charity, and where, as I understand it, the seat owners control 19 of the 24 board places.
There has been a veritable blizzard of allegations and counter allegations; if noble Lords want to follow the events in more detail, the broadsheets will provide some acres of newsprint. I have met with Jon Moynihan, the chairman of the board, and Mr Richard Lyttelton, who is leading for the opposite side. After some years of skirmishing, in September the Charity Commission applied to the Attorney-General to have the issue referred to the Charity Tribunal for investigation and determination, and just before Christmas the Attorney-General gave his consent.
The case gives rise to some points on which I would like the Minister’s views. First, how long do the Government think it will take the Charity Tribunal to adjudicate on this case? I appreciate that the tribunal is a court of law and makes its own timetable. But difficult cases like this should surely be dealt with as speedily as possible and not allowed to fester. I have no idea where the truth lies, but the present confused picture not only potentially damages the reputation of the sector as a whole—the noble Baroness’s report refers to other celebrated cases in recent years that have the same effect—but, maybe unfairly, damages the reputation of the Albert Hall itself. We need sunlight, and quickly.
I will make one final structural point. Under the present regime, the Charity Commission—the regulator of the sector—is unable to apply to the tribunal directly for a ruling on a point of law. It has to get the permission of the Attorney-General, which, in the case of the Albert Hall, took over three months to obtain. Surely this is an unnecessary measure, presenting a barrier to the commission’s ability to contribute constructively to the development of the law against which it is required to regulate. Should not the commission have the power to make references to the tribunal directly, without the need for permission, provided that notification of the reference is given to the Attorney-General, who retains the power to be joined as a party in the case if he so wishes? The Minister might like to take that issue back to the department as an important way in which we could improve the regulation of the sector in the future.
In conclusion, again I congratulate the committee on its report and the Government on their broadly supportive stance. I look forward to seeing progress towards an implementation phase of its many sensible recommendations.
Lord Rooker (Lab)
My Lords, I was a member of the committee and I much enjoyed it—it was the first time I had sat on an ad hoc committee and I found it incredibly useful. I pay tribute to all the members, and in particular the chairmanship of my noble friend Lady Pitkeathley. I have taken a message on board and have come to have a moan. I point out that I am a trustee of the British Motor Sports Training Trust, which does not train drivers but the volunteers and the marshals, and when we started our work I was a trustee of the James Brindley hospital school in Birmingham.
We had some good outside visits. I particularly remember the visits to Manchester, but we did not confine ourselves just to England; we had a successful visit to meet charities in Cardiff. Since the report was published, I have addressed a couple of meetings around the country, one with a group of regional funders—infrastructure bodies—and the other with the Rural Community Council. The message from both was of pleasure that we had not piled red tape on charities; we deliberately set out not to do that.
I will make only a couple of points. First, local government has a tendency to try to snuff out charities on the dubious but unspoken ground that it, the council, should deliver all the services as a job-creation exercise. This is a somewhat Stalinist approach—everything from the centre. In my experience, the driver—I will not give examples—is as much officers as elected councillors. This is apparent when you read the evidence relating to public sector commissioning. I read all the evidence, and we had some fantastic items of evidence, but when you read the evidence on public sector commissioning, it is all there. We deal with this in particular in recommendations 18, 20 and 21. I shall not go over the details, as I shall certainly not speak for long, but those three recommendations are core.
Without core costs, a charity cannot operate. Core costs are part of the service—they are part of the delivery —and we really need to watch what happens here in relation to our recommendations. I accept the government caveat relating to legislation in respect of recommendation 18 on social value, but I am not really sure that all local authorities know what social value is.
The other key point that I want to raise relates to the training of trustees and staff. We particularly set out to deal with this vital issue at some length in recommendations 1 and 8. Training is a core cost in the same way as the paid staff of a charity, who in some cases organise hundreds of volunteers, are a core cost. A core part of the charity is the person who organises the volunteers. People who donate to charities say, “Oh no, we only want to give to the front end—to the delivery part. We’re not interested in the back office”. However, without the back office, you cannot have delivery, and that point came across again and again in the verbal and written evidence that we took. Training is good in any organisation.
Of course, it should be made much easier for charities to merge. I fully accept that there are too many charities, but they are started with the best of intentions and I would not want to snuff that out. Eight thousand charities a year are started. The Charity Commission undertakes a massive enterprise in registering 8,000 new charities a year, as well as regulating the existing ones, but it should be made easier for charities to merge and to amend the terms under which they operate if circumstances change. It is not a failure to merge like- minded charities if various things change—although that is how it has been put across in the past—and that message has to be put out to both the trustees and the Charity Commission. I would like to see a Charity Commission whose members have hands-on, third sector experience. That is highly desirable, but it is a matter for the Government, not for the Charity Commission.
I want to make a final couple of points, one of which relates to recommendation 41. It will be incredibly difficult to ask charities to pay for the regulator. People will not want to donate to a charity in order to pay for the Charity Commission. The commission is a government department; it is not a quango. It is not a non-departmental public body and it is not an executive agency; it is a non-ministerial department exactly like HMRC and the Food Standards Agency. They are just departments that do not have a Minister mucking around and interfering day to day. In other words, they are quasi-independent; nevertheless, they are government departments. You are going to have a hell of a job asking the donor to pay for a government department. We went through all this when the FSA was set up in the late 1990s, so I think that that will be difficult.
On the other hand, a very small minority of charities pay their chief executives enormous six-figure salaries, and I do not see a backlash from the donors. So there is an issue there. It would seem that some donors are quite happy about that because you do not see a backlash. In the past, I have raised the question of charities owning trading companies which pay their chief executives over £1 million.
Finally, this is something that we did not spend a lot of time on, but we raised the issue of trustee membership. That can be a problem. I know of one trustee just entering their fifth decade of trusteeship. One might say, “Oh, they’re elected every four years, so all that is looked at”, but there has to be a time when the founder trustees are told, “You’re in the way of change and fresh blood coming in”, although we did not quite put it like that in our report.
I think that it is a really useful report, notwithstanding the Government’s lukewarm response to the recommendations. It takes a long time to write a short report, and that is one of the problems. However, the response needs watching and following up. I know that the idea of ad hoc committees is that they are set up, they report and that is it. But we have not had that many of them—they have been in place for less than three or four years—and there will come a time when the House ought to say, “Hang on, let’s have a look at the outcomes of the ad hoc committees we have set up”. They are specific and special, and different from all the others, and we need to see whether they do what it says on the tin.
Baroness Scott of Needham Market (LD)
My Lords, I start by drawing the attention of the House to my relevant interests as set out in the register, particularly as a trustee of Community Action Suffolk and a member of the advisory board of the NCVO. It is a pleasure to participate in today’s debate, and to be able to do so having had to wait such a long time for the Government to respond. In contrast, the ink had barely dried on our report before the sector nationally began deciding how best to implement the recommendations.
During 2015 and 2016, the charity sector came under intense scrutiny as a result of the fundraising issues brought to light after the death of Olive Cooke, the collapse of Kids Company and the introduction of new rules on lobbying. My strong feeling is that, during that time, both government and Parliament got the tone wrong. Of course it was right to expect a serious response from the sector to these problems, and for it to learn from them and prevent them happening again. However, there were times when the dialogue was over-confrontational and left the whole sector feeling as though it was taking the blame for the problems caused by a few. Dialogue should be robust, yes, but not confrontational, and it should be respectful of the amazing job that charity groups do in our society.
I am pleased that the committee decided to focus on the needs of smaller charities: 167,000 registered charities have incomes under £100,000 a year and they make up three out of every four charities. While many of our recommendations and conclusions apply equally to charities of all size, the real difference is the capacity of smaller charities to make the changes that they need to in order to thrive in an increasingly challenging environment. We pondered whether there are just too many small charities, although I do not subscribe to that view. The whole sector is about service—people spot a need and they try to fill it, often showing immense passion, commitment and dedication to do so. That is what makes the charity sector so wonderful, so vibrant and so inspiring.
I agree that new charities should be encouraged to take a long, hard look at whether someone else is doing similar work, and the point of application to the Charity Commission is a useful reminder to do so. I also agree that trustees should be encouraged to regularly review whether the original need still exists and, crucially, whether they are meeting it. I welcome the Charity Commission’s commitment to look further at its guidance on mergers and the need to make winding-up charities more straightforward.
On the whole, however, I would prefer to see emphasis on support for small charities to deal with the major issues that face them; namely governance, regulatory compliance and operational effectiveness, including fundraising and digital skills. This is where the infrastructure bodies come in, and I am keen to ensure that local infrastructure bodies are encouraged. They can provide support to small charities in a way which is tailored to local need and perceived by stakeholders as relevant, affordable and more easily accessed than London-based provision. The overwhelming evidence we received was that smaller charities struggle to access the advice, guidance and training that they need. Yet a quick glance at our report shows that over 25 organisations gave evidence on who might provide such help and support. When you add in the local and sectoral bodies, it seems to me that the problem is less about the amount of advice and support that is available and more about how to access it. So I strongly urge Members to support our recommendation 67, which urges the sector to look more closely at how advice is signposted.
Community Action Suffolk was founded in 2013 and was a coming together of 10 community groups in the county, many of which were struggling. Coming together has provided a better scale for good delivery, better value for money and, above all, a stronger voice in the county and more leverage in creating local partnerships. The inevitable pain and compromise of merger has proved very worth while.
As we highlight in our report, trustees are the key to good governance, but in small charities focused on and motivated by their wish to deliver their own objectives they are often seen as more of a legal nicety than as integral to the success of the organisation. Trustee boards often lack diversity, not just in gender and ethnicity but in background. Legal, financial and digital skills are often absent, and failing to look for trustees outside the charity sector runs the risk of boards losing or not having the right skills mix to be fully effective. Regular skills audits can be very powerful and larger charities should hold genuine open recruitment.
This is one of the areas where government can make a difference, promoting trusteeship both within its own workforce and to business. I should like to see the Government consult on statutory time off for trustees, which would be of great practical help and would send out a powerful message about the value of being a trustee.
Because I have not mentioned Suffolk for at least a minute, I should like to highlight the Suffolk young trustee programme. This will give young people a shadow trustee role initially, along with a mentor and appropriate training, to give them a taste of the work of being a trustee. We hope it will encourage voluntary organisations to welcome young trustees and young people to come forward. It is not only commendable from a diversity perspective but could help to promote the digital understanding that so many trustee boards lack.
Noble Lords will have picked up by now that I am a fan of infrastructure bodies, particularly local ones, but they cannot run on fresh air. They face a real conundrum because charging at even a modest level acts as a barrier to smaller charities getting the support they need the most. There is a reluctance from donors, stakeholders and commissioners to cover the core costs of charities, particularly governance costs.
We have heard evidence that the relationship between local government and charities is not always a positive one, despite the fact that their work should be complementary. This is something that government at local and national level needs to address. Perhaps the new regional devolution settlements will provide such an opportunity, but this requires real partnership working between government at all levels and the sector, which we have failed to see so far.
The Lord Bishop of Durham
My Lords, I draw notice to my charitable interests as listed in the House register.
This insightful report rightly stresses that we live in a time when charities provide an ever-greater volume and range of social provision in our society. Therefore, their role must be thoughtfully recognised and supported by the Government. I am proud of the role that the Church of England and all UK faith groups play in this provision. As examples, we run food banks, advice drop-ins, youth clubs and practical skills and jobs training, support the elderly and offer legal support to asylum seekers. According to New Philanthropy Capital, more than a quarter of charities in Great Britain have an association with faith and many people of faith help in the full range of charities. The significance of faith as a motivator for charitable action should never be underestimated. The particular needs and challenges that the Church and other faith-based charities face must be considered and taken seriously in any coherent strategy for the long-term flourishing of UK charities.
Sometimes these charities encounter a lack of religious literacy when relating to local authorities. A recent report from NPC found that many faith-based charities have concerns that a negative or sceptical perception can count against them, particularly with local authority commissioners. Equally, there is a challenge and responsibility for Christians and other faith groups to express their belief in a way that is confident and inviting. In my experience, where churches and Christian charities develop a reputation for delivering services well and inclusively, trust builds and opportunities for collaboration grow. Langley House Trust, for example, is an innovative Christian charity providing offender rehabilitation and substance abuse services across England, operating in 120 sites across 22 local authorities.
Some excellent work has been done on this issue, including the APPG on Faith and Society’s faith covenant. This sets out a joint commitment between local authorities and faith-based groups to guide engagement between them. The covenant is currently working in six areas but could be implemented more widely. What are Her Majesty’s Government doing to improve religious understanding and awareness to ensure further healthy engagement of faith-based charities in the design of future service provision?
I wholeheartedly commend the report’s emphasis on partnership working between the charity and public sectors and the strengthening of social value considerations in commissioning. Too often, provision in one locality or another is fragmented and bewildering. This is detrimental to the charities, particularly small ones, which are often underresourced and subsequently forced into competition with one another. Lack of partnership is, moreover, detrimental to service users, which often slip through gaps in provision. Partnerships lead to holistic, people-centred approaches that can cater to all of an individual’s needs, enabling human flourishing as well as streamlining resources in a time-efficient and cost-efficient way.
A brilliant example of this from my own diocese is Advice in County Durham. This partnership includes more than 120 organisations across the county, including the council, Welfare Rights, Citizens Advice and many small and medium local charities. As well as offering training and network events, it runs an online referral system that enables one charity, for example a food bank, to make an immediate referral to another, for example a debt advice centre. For faith-based charities, many of which, as with many other charities, are small and underresourced, with a high output, partnership working of this nature is fundamental to their survival. While I welcome the Government’s commitment to the Public Services (Social Value) Act in respect of commissioning processes, I lament the recent shift in focus and resources away from voluntary sector compacts. I look forward to the Government’s forthcoming civil society strategy and I trust that it will be a timely opportunity to refocus on this kind of partnership working.
It is vital that good governance, transparency and accountability are at the heart of UK charities. This should include an evidence-based approach to understanding a charity’s impacts. I fully welcome the report’s recommendations on this subject. However, it must be acknowledged that gauging the impact of charities is not easy. The less tangible nature of tasks such as combating social isolation and loneliness, and building community cohesion and belonging at a local level, do not always fit neatly into impact assessments. At a time when many statutory services are going online or facing considerable pressure on time and resources, the relational work that charities and grass-roots community groups undertake is more vital than ever. We must ensure that all independent evaluations of the impact of charities on their clients respect a broad, expansive and inclusive definition of impacts. Gathering stories of change can be one particularly valuable way of evidencing the difference that this work makes.
As we have heard today, volunteers are the lifeblood of charities in the UK. If the charitable sector is evolving in the way that this report identifies, with an ever-larger sphere of responsibility for social provision, we cannot naïvely hope that enough volunteers will just sign up. Indeed, a 2015 Church of England and Church Urban Fund report on church and Christian social action found that one of the biggest barriers to expanding faith-based provision was access to volunteers. Innovatively investing in volunteers is both an appropriate sign of respect for the invaluable role that they play in civil society and fundamental to the sustainability of the sector. I commend one such initiative, Step Up To Serve’s #iwill UK-wide campaign, which aims to make social action a regular part of the lives of as many young people as possible. Much more, however, can be done to change the narrative of volunteering. It must be recognised as a good in its own right and not simply a springboard to paid employment.
How will Her Majesty’s Government facilitate ordinary working people incorporating voluntary action into their lives? We cannot rely on the young and the retired to bear the full strain of UK charitable provision. The charity sector of this nation is one of which we should be rightly proud. Let us do all that we can for it to go from strength to strength.
Baroness Jenkin of Kennington (Con)
My Lords, I start by thanking the noble Baroness, Lady Pitkeathley, not only for introducing the debate so comprehensively but for chairing the committee with experience and wisdom. Much of her expertise was shared by others around the table. She kept us focused and on track when the temptation might have been to drift off at a tangent. I too thank the committee staff, who I think were not in the Box when the noble Baroness thanked them, as well as the specialist adviser and all those who gave evidence. Sometimes their contributions were robust and challenging. Finally, I thank my noble friend Lord Shinkwin for suggesting the sustainability of the charitable sector as a topic for an ad hoc committee. There was total agreement that the title of the report, Stronger Charities for a Stronger Society, reflected what we were all trying to achieve.
I for one learned a lot, not least about the enormous variety among charities. The centrality of the sector to British life, from the smallest kitchen table operation to the largest multinational NGO, is unique in its diversity and complexity. Charities are now responsible for managing assets of value on behalf of local communities and local and national government, whether that be parks, canals or even the local village hall—I know that my noble friend Lord Chadlington, who was on the committee but is not here today, brought his experience to our deliberations as a trustee of a village hall—and for delivering vital public services, whether that be in scientific research or community care. The underpinning foundations of public benefit and the voluntary principle of trusteeship tie together what would otherwise be wildly different organisations. As a trustee of WRAP, Feeding Britain, Cool Earth and until last year UNICEF UK, I have some knowledge of this breadth at first hand.
Of course, the background to the report was the pressure that charities have come under as a result of governance and fundraising issues, reducing the public’s trust and denting the confidence of charities themselves. In the time allotted, I wish briefly to address four issues that were raised in the report: governance, funding, mergers and the work of the Charity Commission.
With all the issues raised around governance, it is a wonder that anyone is prepared to take on the role of trustee, let alone chair. These people—many of us, and all volunteers, let us remember—need support and direction to fulfil their duties to the highest standards. Moreover, we need to inspire a new generation, as other speakers have said. We raised the issue of employers enabling their staff to fulfil these roles, and more should be done to encourage this.
We acknowledge in the report that grant funding has reduced significantly and however much we would wish it to be otherwise, we accept that that is unlikely to change. So an innovative search needs to identify other funding models which will achieve the sustainability we were set up to support. To secure sustainable funding, meaningful and lasting impact needs to be identified. Successful charities know that it is what they do rather than what they say, what they deliver rather than what they promise, that will lead to support from funders. However, outside the scope of this report, there is clearly a need to develop and trial other funding models. Would the Minister consider this and support the setting up of a working group to explore the options?
As other noble Lords, most notably the noble Lord, Lord Rooker, have mentioned, every charity believes that it alone can make a difference. In other sectors, if two organisations can work well together to provide a more effective, efficient and viable service, they do. Mergers should be seen as a success, not a failure, and the charitable sector should be encouraged to merge where appropriate. What matters is for the beneficiaries to get the best service. Government, funders, beneficiaries and whoever else is involved should all encourage this where appropriate.
I turn now to the Charity Commission. The formal role that charities play in our lives makes the regulation of this sector ever more important. The public must have trust and confidence in charities, but as I mentioned earlier, this trust has been dented. We require a robust and effective regulator to maintain it. Our report, government and the sector generally recognise this, which is why they have been afforded such a broad remit. However, as the chairman of the commission has said, both to our committee and elsewhere, the commission no longer has the resource it needs to do the job asked of it. It now regulates 167,000 registered charities in England and Wales. Those charities have a combined annual income of £74.8 billion and gross assets of £265 billion. They are regulated on a budget of £21 million a year by fewer than 300 staff.
Five years ago, amid the scandal of the Cup Trust, the commission was heavily criticised for its failings and for not having been robust enough in rooting out and tackling those who abuse charities. In response the commission, by its own admission, knuckled down and prioritised its investigations work to protect charities and the public, which was what was needed, and it has been recognised as being far more effective in fulfilling that role. Indeed, the National Audit Office recently commended the commission for the significant change it has undergone. At the beginning of that period we all, including the charity sector umbrella bodies, demanded a more robust commission to protect public trust. This is what the public expect.
The key question, which we address in the report, is if we now want the commission to do more, who pays? Our report indicates that if the commission seeks to introduce some form of charge on the sector to pay for some of its work, then it must make clear how it will spend the money. As I understand it, the commission has plans in place to do just that. Now that discussion needs to take place, rationally and objectively, so that we can work in the best interests of charities and the public to ensure that we have a regulator that is funded to meet its wide remit in the best way possible.
I put on record my thanks to Paula Sussex, the former chief executive, and Helen Stephenson, the current chief executive of the commission, as well as to William Shawcross, chairman of the commission, who finishes his term at the end of this month. Over the past five years the commission has changed fundamentally. This has involved hard work from the three chief executives over that period, as well as the commission’s staff, but transformation takes leadership and Mr Shawcross has shown leadership. He joined the commission at a time when its actions—and indeed inactions on notable occasions—were under the spotlight, but as the NAO recognised in its progress report published late last year, the journey has been recognised and appreciated.
As we know, public service is not always easy and we should celebrate and thank those who are prepared to give their energies so willingly and successfully. I place on record our thanks to William Shawcross and I wish his successor, whoever that may be, every success for the future.
Baroness Warwick of Undercliffe (Lab)
My Lords, I declare my interests as set out in the register. I thank my noble friend for securing this debate, for her outstanding work on behalf of carers and for her lifelong commitment to the charitable and voluntary sector. The wide-ranging and thorough work of the Select Committee has resulted in an excellent report, clear-sighted and full of sensible recommendations. It rightly recognises that charities are the underpinning of our civil society, the glue that keeps us together as caring communities, and often an inspiring, mobilising force for helping our most vulnerable to live better lives. This is essential, one might think, and integral to the Prime Minister’s vision of a shared society. It is all the more disappointing, then, that the Government’s response to it is so bland.
The report has been widely welcomed, even when it has some tough things to say about the need for charities to adapt and to change for the better. I know that, since its publication, considerable work has been going on in many charities to take the report’s recommendations on board. I make my remarks today with that positive engagement by the charitable sector in mind. I want to voice my support for the report’s recommendations on funding, particularly those on commissioning and core costs as they apply to small and medium-sized charities. Such charities are usually said to have a turnover of less than £1 million, but for the vast majority it is very much smaller. Yet they deliver vital support and services to our communities, helping those most in need through their knowledge and experience. They are the charities facing the biggest challenges.
As demand increases, public funding is increasingly routed through large contracts that effectively cut out small charities. The replacement of grants by contracts disadvantages smaller charities when having to bid for services. I welcome the report’s recommendation that support be given to developing voluntary sector bidding consortia and that steps be taken to promote commissioning based on impact and social value, rather than simply the lowest cost. Can the Minister tell us more about how the Government are working with the Commissioning Academy to support a more flexible and innovative commissioning approach—one that is indeed focused on impact and social value?
On core costs, my concern is that the pressure to reduce back-office costs and ensure that all donations go to the front line is having a negative impact on smaller charities’ viability. Public sector commissioners should include,
“realistic and justifiable core costs … in contracts”,
as the report recommends. Longer-term contracts would also allow charities,
“to plan effectively for the future”.
As others have said, it is vital that we further strengthen our smaller charities—not just to survive, but to thrive. Charities are working in an ever changing economic and social environment, which is constantly posing new challenges. High-profile failures prompt greater scrutiny, and the report’s recommendations on governance are important and timely. The committee is right to highlight that charities need to look closely at themselves and carry out regular skills audits of their boards. They must identify shortcomings and organise training for trustees, to ensure that the sector maintains the confidence of the public.
Headline-making instances of malpractice have shaken that confidence and linger long in the memory, not least when forensic questioning by the Public Administration and Constitutional Affairs Committee about the failure of one charity becomes the subject of a London show, as it was at the Donmar Warehouse last summer. The credited authors did not need to make it up—it was verbatim theatre at its most topical and illuminating and, I might add, it was sold to theatregoers as,
“how civic life in the UK is really governed”.
Therefore, the report’s suggestions on how to strengthen charity governance are important, and I am heartened by the publication of the updated Charity Governance Code, produced by a cross-sector steering group comprising NCVO, ACEVO, the Small Charities Coalition and others, together with the Charity Commission. Its key recommendations chime with those in the Select Committee’s report. The real momentum it signifies will, I hope, encourage much of the good practice on governance identified by my noble friend’s report.
The need to encourage diversity on charity boards was also highlighted in the report. Regrettably, of course, this is an issue for all boards. A lack of diversity limits a board’s experience and knowledge, whether in business, schools or charities. The report recommended,
“a public consultation on introducing a statutory duty to allow employees of organisations over a certain size to take a limited amount of time off work to perform trustee roles”.
I am disappointed that the Government have shown no appetite for this. Why ever not? This would rightly put trustees on a par with school governors and magistrates. It would be a really positive step towards greater diversity and take-up of board places, it would promote trusteeships to employees, and give greater recognition to trustee roles when recruiting and promoting staff. Of course, the same goes for volunteering. Volunteers make a marvellous, vital contribution to charities’ work, but they need support, managing and training. Employers have a role to play in encouraging people to incorporate volunteering into their lives and further government support for this would make a huge difference. I hope the Minister will agree with me on this.
I will make two further points. I want to add my voice to others who have raised the challenges for charities presented by the new landscape of Brexit. The charities sector receives some £200 million a year from the EU, mainly via the European Social Fund. Can the Minister tell us what steps the Government are taking to replace that £200 million or, at the very least, to mitigate the impact of the loss of that funding? Will the Office for Civil Society carry out the impact audit called for by the report?
I will say a final word in defence of the role of charities in campaigning. This is a legitimate activity by charities and non-partisan campaign groups but the wording of the so-called lobbying Act is vague and confusing, while compliance is costly and burdensome, particularly for smaller charities. Can the Minister give us any indication whether new leadership at the Cabinet Office might see the Government reconsider the reforms proposed to that Act by the noble Lord, Lord Hodgson, which would minimise its unintended consequences? If not, can she say whether campaigning and democratic engagement feature in the civil society strategy?
The report’s 42 recommendations are practical and progressive. Can the Minister assure us that the civil society strategy’s listening exercise will indeed take on board many of the suggestions? Most importantly, will it turn the blandishments of the Government’s response to the report into real action?
Lord Bichard (CB)
My Lords, I refer to my interests as set out in the register. It was a privilege to serve as a member of this Select Committee under the redoubtable chairmanship of the noble Baroness, Lady Pitkeathley, who, as your Lordships have heard, has now been installed as the president of the National Council for Voluntary Organisations. She is therefore formally confirmed as queen of the sector—but then, many of us knew long ago that that was the case.
I welcome the debate today but I will point out, as others have, that it is 10 months since we published this report and we have had five days’ notice of this debate. This rather suggests to me that, in addition to being concerned about the number of Peers in this House, we should be concerned about how we manage our business—how we make use of our time and the talents of the Members of this House. I hope that the Lord Speaker will take that on board shortly.
The report is important simply because the charity sector now plays a crucial—I would say indispensable—part in the way that our society functions. It increasingly delivers essential services for public good—services that even 10 years ago would have been delivered by the public sector. As we say in the report and as the noble Baroness, Lady Pitkeathley, drew attention to, charities provide,
“the eyes, ears and conscience of society. They mobilise, they provide, they inspire, they advocate and they unite”.
As such, I believe that they deserve to be cherished and nurtured because, as the title of the report concludes, strong charities are now a precondition of a strong society. The problem is that, for all the warm words, there are still insufficient signs that the vital role of the sector is even now understood in government. I certainly found the Government’s response to the Select Committee’s report deeply disappointing, as others have said. It does not identify priorities and, more worryingly, does not provide a sense of purpose or direction, a strategy or a way forward.
We must all hope that the forthcoming civil society strategy review delivers a more convincing way ahead. It needs to do that because charities, especially smaller charities, are in danger of being engulfed in a perfect storm of negative developments, all of which the report refers to. We have seen a massive reduction in the level of grant funding for charities, with a consequent loss of autonomy—the freedom to do what the charity believes needs to be done. Those grants have largely been replaced by contracts and, as the report concludes, that shift in the balance of funding will not change and we therefore need to find ways of making it work.
The problem is that charities are having to struggle with, first, very poor-quality commissioning—with catastrophic effects for some, especially again the smaller charities. Contracts are often very short term, so that charities are unable to plan for the future or develop a longer-term strategy, and they often seek to prescribe not just the outcomes but the way in which they should be achieved by particular charities. That takes away the scope for charities to be creative and to innovate. I should remind noble Lords that some of the best public policy ideas of the last 20 or 30 years have derived from the creativity of the charitable sector—but that is being squeezed out by poor commissioning. Many contracts from statutory authorities fail to make sufficient provision, as we have heard, for core costs. Some donors, too, are reluctant to fund anything which does not directly benefit clients. I find it deeply ironic that our state-funded bureaucracies are so reluctant to recognise the need for core administrative costs in others—but they are.
During our work, we also met some brilliant charities of the highest quality. Their leaders told us just how difficult it now is to cope with multiple funders, all of whom seek to impose their own particular audit arrangements and evaluation systems. All of these require additional staff, time and cost, none of which anyone else is keen to fund. They also told us that the social value Act is not delivering its potential and needs to do so.
We also found that contracts are becoming increasingly large because it suits statutory providers to have large uniform contracts. But smaller charities are unable to compete for them and can participate only via subcontracts with the larger charities, so they become dependent upon the big beasts in the charitable jungle. Despite promises down the years to reduce the complexity and the burden of tendering processes, nowhere near enough has been achieved so that, again, especially smaller charities do not have the time and the energy, and the resource and the reserves to compete for those contracts—and, once again, innovation from smaller charities is lost.
I have been struck in recent days, as I am sure other noble Lords have been, by how ironic it is that the Government make it so difficult for small companies and small charities to win contracts in the public sector while they are happy, it seems, to continue to support and invest in very large organisations, such as Carillion, even when the risks are very clear for all to see.
We have heard a great deal about the partnership between statutory providers and the charitable sector. But, like so many so-called special relationships, the reality can be very different. The reality here is that the partnership is not as strong as we would want. That is to some extent evidenced by the failure to involve charities early enough in the design of the services they have to deliver or in changes to policy that affects them. All of us who sat on the Secondary Legislation Scrutiny Committee know just how serious a problem that is. For me, the subtext of the Select Committee’s report is that we cannot continue to heap more responsibility and expectations on the charitable sector while at the same time allowing the environment within which it operates to become more complex, in some ways more obstructive and in some ways more hostile. Someone in government needs to understand that a strong society needs strong charities operating in a supportive environment.
Lord Grade of Yarmouth (Con)
My Lords, I draw the attention of the House to my interests as set out in the register, most particularly as chair of the Fundraising Regulator. I am still a trustee of Band Aid and Live Aid. I am also involved with the Samaritans in a formal way, and with many more charities as well.
This is an extraordinary report. It is very practical and sensible, as we would expect from the committee that was put together to look at these issues. Whatever the Government’s response to it point by point, one of the great values of the report will be for the trustees of charities to read it and to identify some of the issues that they should be thinking of but might not be thinking of and prioritising. That will be of huge value in the years to come. Regardless of how many of the recommendations the Government are willing to accept, I think we will look back at this report as a road map.
There have been quite a number of references to partnership. I have to chuckle when I hear discussions of partnership in the public sector. I remember going to a conference of chief police officers where one chief constable stood up and said that his definition of partnership was the sublimation of mutual loathing in search of further funding. That has stuck with me, so I blanch a bit when I hear the word “partnership”, but it is obviously important.
I will confine myself to a couple of points. As chairman of the Fundraising Regulator, I know there has been a lot of fear about what it was going to do and how it might upset the fundraising abilities of the charitable sector. I arrived from the starting point of being totally overwhelmed in admiration for the British public’s generosity and good will. Having lived through the rise of Children in Need, Comic Relief, ChildLine and many other things, I am staggered by how wonderfully generous the British public are. The job of the Fundraising Regulator is essentially to safeguard that good will and make sure that where there is bad behaviour, we can correct it and give the public confidence that their good will is well founded and looked after. That is our job. We are full of admiration for the work that the charities do and we work very hard to allay their fears that we are there to stop them raising money. That is not the object of the exercise—quite the contrary.
Recommendations 41 and 42 of the report, in respect of the Charity Commission, come down to funding. I am deeply concerned that the funding of the commission is an urgent matter. The responsibilities placed on the Charity Commission today are enormous. There is huge public scrutiny and huge opportunities, particularly online, for abuse and fraud and so on. There is mismanagement and bad governance in places. The Charity Commission is expected to deal with all this, but on the present funding arrangement it is impossible. We have expectations of the commission which go way beyond its resources.
Talk to any charity and it will always say that it has great respect for the Charity Commission, but that it takes ages to get an answer from it. That is not surprising, as it is so underfunded. It is a matter of grave urgency for the Government to settle this. I am not particularly in favour of charities paying for the regulator or of taking money out of the charitable sector in order to pay for regulation. The Government have huge expectations of this statutory body and should make urgent arrangements to have a settlement with it that reflects the responsibility that it has.
I have huge admiration for the retiring chairman, William Shawcross, and all that he has done, most particularly his concentration on reminding trustees of their responsibilities. Having been a trustee for many charities over the years, I sum that up as asking the question which needs to be answered sometimes—why are we doing so well? How is all this money coming in? Are we raising it ethically and so on? The responsibilities of trustees are really important and I congratulate the Charity Commission on its emphasis on that.
There is one item that is perhaps not covered in the otherwise excellent report. I hope the Government will continue to encourage the pay platforms through which people donate to charities to be more transparent. There is good dialogue going on with the pay platforms, and we are making progress, but it is important that all the pay platforms—whether it is Virgin Money, BT, PayPal or whichever—tell us how much they are charging so donors can make their own decisions. We need greater transparency. I think the sector is moving in that direction and I hope the Government will continue to encourage that.
Coming back to the Charity Commission, since we all understand that the process of appointing the next chairman has been completed, I can see no reason why we cannot have the decision. Could my noble friend the Minister give us some idea of when we can expect a decision on that particular issue? I congratulate the committee on an excellent report. I shall make sure that the whole board and all the staff of the Fundraising Regulator have it as their bedside reading.
Viscount Chandos (Lab)
My Lords, I too welcome the report of the Select Committee on Charities and pay tribute to the exceptional work done by my noble friend Lady Pitkeathley and her fellow committee members. I draw the attention of the House to my entries in the register of interests as a trustee of a number of charities, notably the Esmée Fairbairn Foundation, which provided both written and oral evidence to the committee.
What are charities for? They are,
“the eyes, ears and conscience of society”,
begins the report, as quoted by my noble friend Lady Pitkeathley. It goes on:
“They mobilise, they provide, they inspire, they advocate and they unite”.
To that, I suggest is added, “and they innovate”. In the striking written evidence from the Welsh charity People and Work, there is a passage that reads:
“During the twentieth century charities adapted as the State took on many of their traditional roles. As the State … moves away from non-statutory interventions, charities will need to change again but it would be wrong for them to just pick up what the State is walking away from, even if they had the resources to do so. The challenge, and opportunity, is to do things differently and better”.
This has been a persistent theme of Bill Gates ever since he established the Bill and Melinda Gates Foundation in interviews and speeches, in both the US and the UK. In a recent speech in Washington, he said that philanthropy cannot be a substitute for the Government in achieving wider societal improvements. Philanthropy depends on research and innovation in seeking solutions for societal problems, but it is the Government’s role to work for an overall better society. If that is true from the perspective of one of the largest grant-making foundations in the world, how much truer is it for smaller institutions? It should therefore be a critical principle for charities to adhere to but even more important that the Government should recognise it rather than, as they have done too often in the past, seeing philanthropy and charity as convenient substitutes for their own obligations.
I shall pick up on just two points from the wealth of important analysis in the report. The recommendation of independent evaluation would have to be implemented with due regard to the size of the organisations concerned and their capability of delivering this. Even the largest and best-resourced charities are challenged to make an effective assessment of impact. Indeed, I was struck by reference in the evidence to the “paradox of outcomes” put forward by Dr Toby Lowe of Newcastle University, who suggested:
“the more we measure, the less we understand”.
In looking at grant-making, I have often seen a parallel with the famous dictum of Lord Leverhulme: “Half the money I spend on advertising is wasted; the problem is I don’t know which half”. Impact evaluation is and may well remain an impressionistic part, not a precise science. We should therefore not have unrealistic expectations of what can be achieved or, hence, place unreasonable burdens on charities in reporting on it.
The other point that I wish to raise relates to social investment. Although this has not been much discussed today, your Lordships’ House considered the issue of social investment during the passage of the Charities (Protection and Social Investment) Act 2015, and the report has added significantly to the analysis of the potential for social investment. Social investment, in whatever form, requires the recipient to have prospects of generating revenue that allows the investments to be repaid or realised. As Andrew O’Brien of the Charity Finance Group commented, the “vast majority of the” charity,
“sector is working in areas of market failure … so the idea that you can commercialise those services and try to generate a surplus that could pay an investor is in most cases quite limited”.
I believe that this analysis is more compelling than, for instance, the evidence from Investing for Good that the potential scale of social finance compared to grants was much larger. In comparison, according to Richard Jenkins of the Association of Charitable Foundations, grants,
“are almost unique in their currency”,
and,
“can do things that other forms of funding cannot. It offers flexibility and a bit of freedom for innovation”.
I do not wish to imply that the development of social investment is unwelcome; indeed, it should be further encouraged, but care must be taken to ensure that this is not at the expense of donations and grants to charities, on which their day-to-day operations depend. Nor should the further development of social impact bonds based on payments by results lead to government funding of public services at unnecessarily high cost, with inadequate transfer of risk relative to the payments made—a case of PFI syndrome.
I end by strongly supporting other noble Lords in advocating that the recommendations of the noble Lord, Lord Hodgson, should be adopted by the Government.
Lord Shutt of Greetland (LD)
My Lords, first, I should declare my charity interests. They are Pennine Heritage, X-Pert Health, Cober Hill Charitable Trust and the Halifax Choral Society (1817) Ltd. Because of my two years in government from 2010 to 2012, I had to stand down from other charities; these were the Joseph Rowntree Charitable Trust, JRSST Charitable Trust, the Historic Chapels Trust, Northern Broadsides and the Irish Peace Institute. For completeness, I should add that in 1990 I started the Community Foundation for Calderdale, where I am now a vice-president. I now realise that these charitable endeavours have taken place over some 43 years.
The Select Committee’s report makes some very valid contributions on such subjects as grants, contracts and commissioning, digital technology, alternative forms of charity finance, the opportunity for all for charitable service, including time off work, the resources of the Charity Commission and the impact of Brexit for some charities. I have to say that the Government’s response appears to be, “How interesting”.
I find it of interest to see from the preamble that the committee, while being concerned about reductions in national and local government funding for charities, was tackling its work at a time of concern about the Kids Company failure and alleged exploitative and unethical fundraising methods by some of the best-known charities. As the noble Lord, Lord Rooker, pointed out, it was also at a time of issues with high salaries for some executive officers of charities. The committee chose to concentrate on issues relating to sustaining the charitable sector and challenges of governance, and I will return to that later.
However, I believe that one of the more interesting features of charitable endeavour is the incredible variety in what I may call the horizontal and the vertical, the horizontal being what the charity does. A charity may provide a service or be an awareness raiser or an endowed foundation and grant maker. The vertical is the different form that the charity takes: governed by a trust deed, accompanied by guarantee or a charitable incorporated organisation. These different features and the new definitions of charity set out in the 2006 Act provide even more opportunity to let many flowers grow. It occurs to me that charities may have very different challenges and governance needs dependent on those factors.
Turning to governance, one question worth asking is: to whom do charities belong? I believe that the answer can only be the trustees, for the time being. The trustees or their predecessors are those who formed the charity, and it is they or their successors who are able to lay it down or wind it up. I am therefore concerned at the report’s conclusions that trustees be more transient, with the voluntary governance code suggesting a nine-year maximum time limit for service as a trustee. I note that this code is voluntary, and it is suggested there might be exceptions, but I believe that if this were to gain greater force and, indeed, if at some stage some Government were tempted to make it a statutory provision, it would be harmful to charities as a whole. While agreeing that trustee turnover can and does have benefits, in my experience it is happening more and more because of changing employment patterns and people’s time availability. I contend that, if you get a good trustee, you should hang on to him or her. I also believe that it is essential for a trust board to have anchorage to its ethos and to retain a corporate memory within the trustee body.
I am also concerned that it is for the UK corporate good that endowed foundations in particular continue to be created. A culture of a nine-year time limit could well put off the potential entrepreneur from being generous and setting up a foundation if they believe, or are advised, that a time limit on personal involvement was now the prevailing culture. It has to be remembered that charitable generosity is a one-way ticket; there is no return ticket whereby resources, once given, can be returned to the donor. I repeat: the wealthy donor could be deterred from creating new foundations. Nothing should be seen as an impediment to this century’s Rowntree or Cadbury coming forward and creating foundations.
I return to the concerns that troubled charitable endeavour when the committee commenced its work—the executive employees overreaching themselves. It may be that such employees, having asked the question, “To whom does the charity belong?”, came up with the wrong answer. This is but one reason why strong and sound trustees are needed; it is an area in which the Charity Commission could perhaps give advice to strengthen and make clear to trustees to whom the charity belongs.
Lord Lea of Crondall (Lab)
My Lords, I welcome the report and take the opportunity to welcome my noble friend Lady Prosser to her role on the Front Bench replying to this debate.
I think that I may be about to rock the boat slightly, first on some general considerations and, secondly, on the specific issue of the Charity Commission’s interpretation and process of whether or not to judge a charity “political” and therefore ruled out from being registered for tax relief purposes.
Tax relief is a big driver; there is no doubt about it—I was going to say that it is a tax relief sector. In that sense, I am sure that from the Treasury’s perspective it is a public policy tool for various reasons, but that puts great pressure on the Charity Commission to get it right when it comes to registration. I do not have the numbers in my head, but I would guess that 80% of charities are registered charities. People may nod or shake their heads if I have got that wildly wrong, but there is a very strong incentive, as we all know, for a charity to get Charity Commission-registered status.
The Government in their reply underline the point that there has been a very big growth in the turnover in charities. It is £100 million or £100 billion—the number is in there, and I shall dig it out and get it right in a minute. It is a big number, and no wonder it is growing because, although the donors get the tax relief and not the charity, it means that we have this big growth.
This makes it extremely important that everybody is comfortable with the way in which the sector operates. This raises important questions—some of the ideas are outrageous and, although they do not come from my noble friend Lord Rooker, the issue he raised leads to them. In what sense do people working for charities think of themselves as being judged by different considerations to those who are maximising profits or whatever in any other sector of the economy? Sometimes it is not so obvious.
I put my name down to speak in this debate to register an interest of sorts—what I will call a negative financial interest—having failed to get charitable status from the Charity Commission for the Hammarskjöld Inquiry Trust. This meant that the £60,000 which it costs to run it comes out of my own pocket and nobody else’s. I had to pay every penny, including for visits to the United Nations in New York—the hotels, the lot. The Charity Commission refused charitable status because it said it was political. It had contacts in New York and said that the United Nations were not interested. Only last December, a further resolution, submitted to the United Nations by Sweden, was carried by 90 votes to zero. It recognised that there was considerable evidence that the death of Dag Hammarskjöld was associated with the presence of a second aeroplane. Six years before, the Charity Commission said that one reason for refusing charitable status was that there was no evidence that the United Nations was interested. Put that in your pipe and smoke it, Mr Shawcross, or anybody else who was involved at that time.
I was able to present a report to the United Nations a year after the trust was set up and it led to this inference being drawn and a considerable change to United Nations policy. I cannot go into more detail now, but the trustees were very distinguished, including a former Secretary-General of the Commonwealth, a former assistant general secretary for legal affairs at the United Nations, the former chief prosecutor to the Rwanda inquiry of the International Criminal Court and a former president of that court in The Hague.
I found the idea that we were a political body outrageous at the time. It is inconsistent that so many other groups, such as think tanks, which are doing more self-evidently political work are readily given charitable status. I do not know who got at the Charity Commission, either from the Foreign Office or anywhere else, but I do know that the decision was outrageous. I suggest that the political test should be more transparent, with a protocol setting out what the test is, so that we can all see it out in the open.
Lord Harries of Pentregarth (CB)
My Lords, it was a great privilege to serve on the Select Committee under the excellent chairmanship of the noble Baroness, Lady Pitkeathley.
Charities have always played a key role in our society, and in recent years an increasingly crucial one. One way in which their role has expanded enormously, of course, is in the work they now undertake as service providers. A number of our recommendations—14 to 21—address this. The noble Lord, Lord Bichard, drew attention to the difficulties that the current process causes for many contracts.
I draw attention to recommendation 20, which says:
“Charities cannot operate unless their core costs are met”.
The Government in their response agreed that the sustainability of delivery organisations was an important factor but went on to say:
“Securing best value for taxpayers’ money will also continue to be a key factor”.
Of course, it should be a factor but it is very disappointing that the Government have not been more explicit about the need for core costs to be met. Without those core costs being met, a charity will fail in the end, and everyone will be the loser. It is not an excessively complex task to work out on any particular contract what percentage should be added to the direct service costs to cover the administration which makes the continuing existence of the charity possible. After all, charities themselves do such sums when they raise money. They will often tell the public how much they spend on administration and publicity and how much goes directly to their clients. They often pride themselves on the low percentage that they spend on administration and the large percentage that goes to the cause in question. Therefore, I would like a much more definite commitment from the Government that realistic core costs will indeed be included in the contract for delivery. A number of noble Lords emphasised this, particularly the noble Lord, Lord Rooker, who did so eloquently.
Recommendation 28 says:
“Funders need to be more receptive to requests for resources for volunteer managers and co-ordinators, especially where charities are able to demonstrate a … potential volunteer base”.
The Select Committee had this drawn very much to its attention on our very enlightening visit to Sheffield, where we spoke to members of the council who told us about the difficulties they faced given the 50% cut in their budget: for example, libraries having to be staffed significantly by volunteers. If I remember correctly, they said that they had two paid managers for their volunteers. Volunteers, by definition, are cost-free. However to be effective on a large scale, they need effective management from somebody who is most likely in paid employment.
A number of recommendations are addressed to the Charity Commission, and some good points have been made in relation to that. However, the point has not been made that when the Charity Commission consults the sector on how these extra costs might be raised and deployed, it is very important that it consults with various infrastructure bodies, as we were surprised at the number of infrastructure bodies that already exist to help charities in one way or another. It is obviously very important that the work they do is not simply replicated by the Charity Commission. There needs to be good, strong consultation in this regard.
My final area of concern is picked up in Recommendation 37, which states:
“We believe that Lord Hodgson of Astley Abbotts’ proposals for a review of the rules set out in the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 are eminently sensible”.
I stress “eminently sensible”. It was good to hear the noble Lord, Lord Hodgson, speak about that this afternoon. It was therefore particularly disappointing that the Government responded that they would not bring forward legislation to implement his recommendations on the grounds that:
“The legislative programme for this session is already at full capacity”.
I briefly remind the House what lies behind the Hodgson report. In 2012, the Government brought forward a hasty and ill thought-out piece of legislation—Part 2 of the lobbying Act—concerned with what third-party groups could do by way of campaigning during elections. I declare an interest as chair of the Commission on Civil Society and Democratic Engagement, which represents a whole range of charitable and campaigning bodies of very varying political views and persuasions. They were and are still concerned about the effect of what is now the 2014 Act. Your Lordships managed to get some changes to the Act as it passed through this House, not least getting a recommendation that the Act be reviewed. That review has now taken place, and the result is the Hodgson report.
It is important to remind ourselves that campaigning by voluntary groups in our history has brought about most progressive changes, from the abolition of slavery to our present period. In our own time, charities of one kind or another are usually at the front line of meeting human need and are most acutely sensitive to how government policy impacts upon the people they serve. It is therefore crucial that they be allowed to make their views known, including during election periods.
Most of the recommendations in the report of the noble Lord, Lord Hodgson, could be implemented without difficulty. As our report says, they are “eminently sensible”. There is one particularly complex area, about which the noble Lord spoke, and I hope that the Government will listen to what he said. It is a genuinely complex area which has teased philosophers of mind and philosophers of law for hundreds of years. But what he suggested today would make possible a meeting of minds on that recommendation, and I very much hope that, in the not too distant future, a parliamentary Session will be able to implement those recommendations. The charity sector is disappointed by the Government’s negative response to that excellent report.
Lord Judd (Lab)
My Lords, I have spent a great deal of my life in the charitable sector. I worked professionally—among other things, I was chief executive of Oxfam and Voluntary Service Overseas—and spent a great deal of time in the charitable sector as a volunteer and trustee, in some instances chairing boards of trustees.
This report is superb, and I warmly congratulate my noble friend Lady Pitkeathley on her leadership in producing it. However, I found it striking to read the declarations of interest by the members of the committee as published in the report. What a wealth of talent and in-depth experience of the issues we are discussing. It is important for the Government not to cherry-pick but to take the whole report, take it seriously and implement it. In this respect, special tribute must of course be paid to the noble Lord, Lord Hodgson, for the courage and character of his own observations on all this.
It is true to say that, particularly during my time with Oxfam, I came to the conclusion that campaigning was perhaps at times the most important service to those we claimed to serve. It is as though intellectually and morally, charities have grown up. They said, “We’re no longer prepared simply to succour need”. Very often that can in effect perpetuate the need, because it may remove the unpalatable signs of what is wrong but fail in the responsibility to speak out about the causes. That is why I find it sad that, in what we want to be a thriving democracy, we do not accept that charities have an important, key role to play at times such as general elections. They are not just political party manifestos; they speak with the authority of engagement.
One other point which should be emphasised—the noble and right reverend Lord, Lord Harries, has drawn attention to it, as have others—is that core funding is in many ways key to the whole concept of a charity. In the last two decades there has been a tendency to move towards a world of subcontracting, and charities have, in effect, become deliverers of services contracted by somebody else. I want the best possible public services in Britain—I take second place to nobody in that—and that is one of the reasons why I am on this side of the House. However, charities are not just about public service; they are about being catalysts in society. They are about engaging with and enthusing the public with the issues that need to be addressed; they are about increasing public awareness of the challenges we face. If we do not give core funding the attention it deserves, a charity loses the ability to be itself, to develop thought and to make its own choices about where the priorities are. I repeat that it becomes a deliverer of services, which is increasingly a world of subcontracting.
I conclude with an anecdote from my time as director of Oxfam. I was coming towards the end of my stint and was in central America, which at that time was a terrible place—the most terrible things were happening. I had been in El Salvador and Nicaragua and was now in Mexico. I remember our field director getting rather irritated with me. I was talking about all the things that were happening in the countries I have just mentioned and she said, “But it’s happening here”.
I met the Bishop of San Cristóbal, who was an incredibly courageous chap. He wore an open-necked shirt, was very simply dressed and wore a wooden crucifix, but, my God, was he standing by the poor of Chiapas, who were being exploited. He was always in trouble with the Mexican Government of the day because he challenged them about what was happening. We were sitting in his simple terraced house talking over a cup of tea. I asked, “Have you got a message that you’d like me to take back not just to my colleagues and supporters in Oxfam but to the wider public?”. He said, “Yes, I have”. The first point that he made haunts me to this day, and it is something none of us working in the charity sector can escape. He said, “Oxfam talks a great deal about its commitment to equality, but how equal are these people with whom you work, or how far are they in effect the indispensable objects of your institutional need?”.
My second point is that in situations like that you cannot be neutral—you have to stand up and be counted. However, what matters is solidarity. He said, “Solidarity is a process of identification at the level of the individual, the family, the community and the nation and, hopefully, internationally”. My God, I wish that there were more international solidarity abroad in Britain these days. He said, “Solidarity is the real challenge of charity”. I have never forgotten that conversation; it has been a lodestar for me in my life ever since.
When you think about it—and we in this House should think about it—you will see that we talk about the poor and to the poor, but how often do we talk with them and for them? How far are we the instrument of putting on the agenda the real issues as seen from the perspective of those about whom we are speaking? For that reason, I believe that the Government’s failure to respond on this point, as was so well emphasised by the brave stand of the noble Lord, Lord Hodgson, is a very serious omission that needs to be put right as soon as possible.
Baroness Barker (LD)
My Lords, I declare an interest as the owner of a consultancy that works in the third sector and as an adviser to Charity Checkout. Last year, I was in conversation with a well-known political commentator and we were talking about an eagerly anticipated report from a sub-committee of your Lordships’ House. The commentator said, “I gather it is going to be somewhat critical of the Government, and this from a body in which the raising of an eyebrow is the equivalent elsewhere of throwing a chair through a window”. We did not throw any chairs out of windows in our committee, but we had some really robust discussions and we gave the people who came to talk to us quite a hard time occasionally. As a result of that, we came up with the report that we did.
If I had to say only one thing about the report, it would be this: in the wake of all the scandals and so on that people have talked about, we set ourselves a challenge to think strategically about the development of the charitable sector and the part that it has to play in our society. I think that, together in our collective wisdom, we did a very good job. We can contrast our way of working and what we have achieved with a debate that took place on 28 November in another place. I suggest that Members of this House look at that House of Commons debate on fundraising. It was astonishingly naive and misinformed, and it came to some wrong conclusions.
The noble Lord, Lord Grade, should know that there is another definition of partnership: if somebody is working on something in a closely allied part of the forest to you, you acknowledge that and let them get on with it. Because his work concentrates very much on fundraising regulations, we did not. However, since he has mentioned it, I will say this: a number of fundraising platforms that are working now have behind them substantial donations from philanthropists, and therefore they are not declaring the full costs of their operation in the way that other groups do. I hope that when the noble Lord’s committee looks at that, it makes sure not to draw false comparisons between different operating systems.
We did quite rightly home in on the issue of governance, because that is what the sector needs to get right fundamentally. We were fortunate that the governance code came along as we were doing our work, but having such a code is not in itself an answer because governance in the charity sector is complicated—charities do not just have a profit and loss accountant to tell them what they are doing right; they have triple-line accounting. Therefore, as the report states, it is important that for many of the things we talked about there are sources of help and support to enable trustees to ensure that they are getting governance decisions right. We heard a lot about the involvement of young people as trustees, and I urge noble Lords to look at the evidence presented to us on that. During the summer, I conducted a governance review of a major national charity, and we have begun to look at ways in which we could develop things such as trustee apprenticeships, to enable young people to approach sitting on a board as a stepping stone towards further civic engagement.
We talked briefly about commissioning and the social value Act. We have this debate while watching the fallout from Carillion, which is only just beginning to unfold. I say to noble Lords: your local library may well have been run by Carillion and may not be there much longer. At a time of greater devolution of power and decision-making to local government, it is right to go back and look at the social value Act again. In many areas, local authority funding is still a large part of the local economy and we need to find ways for smaller organisations to be supported by those funds, to make sure that an area’s social fabric is sustainable.
I banged on all the way through our report about the need to support the charitable sector in digital development. It is crucial for companies and all of us throughout all areas of life to get on top of digital. Frankly, it is essential for charities but they do not have access to resources and they get precious little help from the big tech companies, some of which gave evidence to our report—I have to say, it was not very impressive. A woman called Zoe Amar has produced the Charity Digital Skills Report and it is clear that we need the support of government and funders, such as the Big Lottery Fund, to enable charities to make this key change in all that they do.
Charities thrive on being the ones that know what is happening first in society. However, a question we asked pretty well everyone who came to give us evidence was: if, in your local area, a charity showed up and Aldi showed up, which would you be more pleased to see and which do you think would know more about your community? The answer is not always the one that we would hope for. It is for the Government to step up on their answer to this and in supporting us to work better digitally and for the regulators to improve their digital involvement with charities. The Charity Commissioners for Northern Ireland and Scotland were very clear about the ways in which they are encouraging charities to be accountable via the web—via Facebook pages and so on. That is truly important if charities are to regain, as they wish to do, the support of the public.
The right reverend Prelate is absolutely right about the role of religious charities and I encourage him to look at our discussions with the Church Urban Fund and the Islamic charity Penny Appeal. However, I say to him that unless and until those religious charities welcome everybody—and I mean everybody—in a locality, there will always be something of a tension and something of a reservation before some of us engage with them in the ways that we would wish to.
There is an awful lot in this report; it is for now and for the future. I am very glad that the infrastructure bodies have given it the welcome it deserves and I wish the Government and the Charity Commission would do likewise.
Baroness Prosser (Lab)
My Lords, first, I draw the attention of the House to my interests as listed in the register. Secondly, I thank my noble friend Lady Pitkeathley for her introduction to the report and congratulate her and her fellow committee members on an excellent and thorough report. Thirdly, I welcome the noble Baroness, Lady Chisholm, to her place back on the Front Bench.
I can see that there is respect across the House for the work of the charity sector. It is an integral part of the framework of our society, able to move into action while national and local bureaucracies start by establishing a committee to help them think about it. My support for the voluntary sector may of course be coloured by my having spent seven very happy years working in a law centre in the London Borough of Southwark. We worked jointly with other local organisations such as the CAB, housing advice groups, tenants’ and residents’ organisations and so on. We knew each other and we knew the neighbourhood and that was important because it helped us to make sound judgments.
That was all quite a long time ago. Since then, life has become much more complicated and the range of services provided by the third sector wider and more varied. The health and social care sector is of course at the heart of this changing scene—all the more need then for a secure, well-supported sector capable of employing professional and skilled staff ready to deliver to the myriad concerns confronted by today’s society.
What do charities big and small most need to be able to function effectively, to listen and act for the people or groups of people they seek to serve, to work proactively and professionally, to bring concerns to a wider audience and to promote suggested solutions for the way forward? The committee’s report makes recommendations for a number of those areas. There are two main elements that have been identified as essential to the long-term health of the charitable sector—sufficient resources and stability are each essential to success. Reliability of core costs is essential. My noble friend Lord Rooker has already made that point, as have other noble Lords.
The Government’s mantra regarding reduction of back-office costs is seriously misplaced. Of course, no one should tolerate waste, but this discussion is conducted as though back-office costs were a luxury and bore no relation to the work of an organisation overall. Charities need secure core costs. Front-line staff cannot do their jobs effectively or efficiently without the day-to-day work of administrative and support staff. The irony of the Government’s argument does not escape me when I meet with Ministers who are always accompanied by a phalanx of civil servants and advisers—back-room staff writ large.
It is also a penny-wise and pound-foolish argument. I understand that HMRC no longer tolerates legally qualified staff doing their own photocopying because it understands the argument that is not sensible to pay a lawyer’s salary for time spent doing an admin job that could and should be done by a person on the appropriate grade.
An organisation with secure finances is also more likely to be a stable organisation, enabling it to think longer term. Most charities have a keen awareness of the long-term nature of their work. Building knowledge and trust does not happen quickly. The experience of staff and of course of trustees is key and central to reaching a professional position commanding respect from their particular communities of interest. Stable finances, including longer-term contracts and the long-term commitment of staff and trustees, would all make charitable and third sector organisations capable of delivering outcomes valuable to the community and helpful to government.
The committee’s report also highlights the need for better consultation from the Government when introducing new or different policy proposals. The anti-advocacy proposals have caused much upset and have been mentioned many times this afternoon in this debate. They have led many organisations to feel genuinely threatened. The review of the noble Lord, Lord Hodgson, was welcomed and the Government should recognise that their own proposals, described by many as a gagging clause, were seen as deeply offensive. The work of many charities is about campaigning for change and for the influence of policymakers. To try to curtail that legitimate function borders on the anti-democratic. The letter to the then Secretary of State in August last year about this matter was supported by more than 120 charities ranging over the whole spectrum.
Much has already been said about the recommendations of the report and I will not repeat those points now, but there are two other areas that I believe must be hammered home. First, what are the Government proposing to do to ensure security of funding for those organisations currently funded in whole or in part by the European Union? Personally, I have all my fingers and toes crossed that we never leave the EU, but we must be prepared. It is estimated that £200 million will be lost to the sector. The Labour Benches in the other place have called for a full DCMS-led assessment of the impact that Brexit will have on funding, on the workforce and on service demand. Is the Minister prepared to commit the Government to conducting such an assessment and how will that fit into the proposed civil society strategy?
Finally, perhaps I may repeat a point made by my noble friend Lady Pitkeathley. What is the situation with regard to the appointment of a new chair of the Charity Commission? If I may say so in the confines of this Chamber, the Government are not building themselves a fine reputation with regard to public appointments, which leaves those of us concerned about such matters feeling slightly anxious when appointments are delayed. I am sure that the House would be keen to be assured that matters are under control and that an announcement of the new chair for the commission will be made imminently.
Baroness Chisholm of Owlpen (Con)
My Lords, I am delighted to be at the Dispatch Box to respond to this debate and I welcome the noble Baroness, Lady Prosser, to the Front Bench. I do not think that this is her first foray, but I welcome her none the less. First, let me thank the noble Baroness, Lady Pitkeathley, for her speech and for chairing the Select Committee on Charities. The noble Baroness has a wealth of voluntary sector experience and expertise and is a strong and persuasive advocate for it. I always enjoy and learn from her speeches on this subject and indeed when she speaks on carers. I thank the members of the committee for their knowledge and expertise as well as all those who gave evidence for the report. As the noble Lord, Lord Rooker, mentioned, I welcome in particular the decision of the committee to hear the voices of smaller charities, with round-table events in Cardiff, Manchester and London. The result is a wide-ranging and thoughtful report which informs the debate and helps us to set the agenda for our future work on the civil society strategy, which I will talk about later in my speech.
I apologise that we were able to publish our response to the report only just before the Christmas Recess, and I know that this has upset many noble Lords who have spoken in the debate. This was due in part to the ministerial changes resulting from the general election and in part to ensure that our response could dovetail with our plans for the development of the civil society strategy.
As the noble Baroness, Lady Warwick of Undercliffe, mentioned, civil society is a vital part of our society, playing a hugely important role. Charities sit at the heart of civil society and we should celebrate our charities for all they do to benefit the public. We are fortunate to have a charity sector that is resilient and continuing to grow. The Charity Commission has noted an increase of 40% in charity registration applications over the past three years, and the sector’s annual income has grown by £5 billion over the past two years to an all-time high of £74.4 billion. The noble Baroness, Lady Pitkeathley, said that this growth has come at a time of economic uncertainty, which makes it all the more impressive. However, we appreciate that the overall picture masks the fact that some charities have struggled to adapt to the changing economic climate. Those which have been historically reliant on funding from the public sector have perhaps been the most affected.
It is hard to single out particular charities for special mention given the scale and diversity of the sector and the sheer amount of good work that charities are doing, supporting those in need in every community in all parts of the country. However, I want to pay tribute to the work of the charities that have responded to last year’s terrorist attacks and the Grenfell Tower fire. They have worked tirelessly to raise and distribute significant funds to victims, survivors and next of kin, and give support to those in need. They showcase many of the selfless qualities that we see across civil society, mobilising resources quickly and helping people at the time of greatest need.
We have seen the huge impact that those in the public eye can have in mobilising support and raising the profile of charitable causes. We owe a special debt to the Royal Family for their unstinting support for a huge range of charities and causes. We have recently seen the difference that can be made in mobilising the young when Prince Harry and the Duke of Cambridge speak out.
I also want to mention the significant contribution of the chair of the Charity Commission, William Shawcross, as he completes his term of office. As my noble friend Lady Jenkin mentioned, he has led a major transformation programme at the Charity Commission, turning it into a modern, effective regulator. Like her, I was pleased to see that the significant progress made by the Charity Commission was recognised by the National Audit Office in its most recent update report in November. The noble Baroness, Lady Pitkeathley, naturally asked when we were going to get the new commissioner, and several noble Lords mentioned the impartiality of the new commissioner. The new chair of the Charity Commission will be announced in due course. I know that that is a maddening thing to say but in this case “in due course” means really shortly.
As for impartiality, the recruitment process for the new chair follows the Cabinet Office Governance Code on Public Appointments, including its principles of fairness, merit and openness. Under the code, any significant political activity undertaken by an appointee in the last five years must be declared. This is defined as including holding office, public speaking, making a recordable donation or candidature for election. The new chair will be the best person for the role and will be expected to be independent and impartial.
Turning back to the committee’s report, I shall address three of its central themes—funding and commissioning, advocacy, and trustees and partnerships —before I conclude by saying a few words about the Government’s forthcoming civil society strategy. The first theme relates to funding and commissioning. Overall, government funding for the sector remains relatively stable despite fiscal pressures. According to the NCVO almanac, government funding for the sector has increased from £14.6 billion in 2012-13 to £15.3 billion in 2014-15, the most recent year for which figures are available. Funding is split almost 50:50 between local and central government and more than 80% of funding is earned through contracts. The ratio of government funding through contracts, as opposed to grants, has remained relatively stable since 2010.
We recognise that grant funding can remain an important source of funding for some charities, as the committee’s report highlights. There has been a significant effort in central government to strengthen our grant-making processes to ensure that grants are properly managed and taxpayers’ money is being used effectively. Grants will continue to be an important part of the funding mix. Following on from that, more than 260 small and medium-sized civil society organisations were supported by our £18 million local sustainability fund, to help organisations secure the long-term future of services aimed at vulnerable and disadvantaged people. The evaluation of that fund is being published today and shows the positive impact that funding focused on sustainability has had.
We have also done much to improve commissioning practices, although we accept that there is still more to be done. Our work to date has included promoting the Public Services (Social Value) Act, working with the Commissioning Academy, which has trained more than 1,400 public sector commissioners, and working with small and medium-sized charities to identify barriers that are preventing them accessing the public services market. The noble Viscount, Lord Chandos, talked about social investment and social impact bonds and I hear what he says. Our focus on social investment and social impact bonds is expanding a range of innovative funding mechanisms that reward impact and positive outcomes, leverage in other sources of finance and can be more sustainable by recycling funding. Also, our work so far on the public services programme has given us important insight into the issues relating to the public service market. This will feed into the forthcoming civil society strategy. We still intend to appoint a VCSE Crown representative and they should be in post soon. Our commissioning academies also continue and the next wave has just got under way. We remain fundamentally committed to the Public Services (Social Value) Act and continue to implement the recommendations of the 2015 review carried out by the noble Lord, Lord Young.
In relation to advocacy and campaigning, the Government recognise and respect charities’ important role in speaking out on behalf of their beneficiaries. The transparency of lobbying Act, which was mentioned by many noble Lords, does not stop charities campaigning in support of their charitable purpose in a non-party-political way. The purpose of the Act is to ensure that there is transparency where non-party campaigning influences election outcomes. Despite not being able to take forward legislation to implement the review of my noble friend Lord Hodgson, we remain keen to work with charities to shift the perception of the legislation, and encourage them to continue their important campaigning work. My noble friend will know that Cabinet Office Ministers are responsible for this. I am sure they will want to consider his points and I will make sure that they hear what he has said.
The third area of the report I want to focus on is trustees and governance, which was mentioned by the noble Lord, Lord Shutt of Greetland, and others. We all owe a debt of gratitude to charity trustees, who perform a vital voluntary role, as the committee’s report recognises. We agree with the committee about the importance of the trustee role. As the noble Baroness, Lady Scott of Needham Market, mentioned, in 2016 the Office for Civil Society established the Skills Exchange Alliance with business and voluntary sector representatives to support growth in the quality and quantity of employer-supported volunteering, including encouraging more people to become charity trustees. The noble Baronesses, Lady Pitkeathley, Lady Scott of Needham Market and Lady Warwick of Undercliffe, all talked about more work needing to be done in supporting trustees in their role and in improving trustee diversity, particularly growing the number of young people who are trustees. We heard from the noble Baroness, Lady Scott of Needham Market, about the successful Suffolk Young Trustee Programme—a good example of how to encourage the young to get involved.
We also know that small charities can find changing regulation particularly challenging. This year the general data protection regulation comes into effect, and I welcome the work of the Information Commissioner in providing a dedicated helpline service for small organisations, including charities, and an updated SME toolkit to reflect the requirements of the GDPR. The Fundraising Regulator, working with a number of other partners, including the Institute of Fundraising, is also developing simple guidance, specifically aimed at small charities, to help them better understand the new GDPR requirements.
Last year we established the Inclusive Economy Partnership with charity and business leaders. It is bringing together business, civil society, faith groups and government to help address some of the key challenges facing society. Partnerships, including those that cross sector boundaries, will be a key theme in the forthcoming civil society strategy. Many noble Lords talked about this. We all realise how important it is that there is some joined-up thinking across the whole sector to help charities move forward and to help them through the difficult time that many of them are having.
On the theme of partnerships, I welcome the leadership role shown by the charity sector in establishing several working groups to take forward the committee’s recommendations. As my noble friend Lady Jenkin mentioned, there is also potential for greater collaboration between like-minded and mission-oriented charities, which work tirelessly for their beneficiaries. It is when we all work together that we can deliver real, long-lasting social change.
I will now address points that were raised in the debate, before finishing on civil society and what we are doing to make sure that we listen to the recommendations that have been put forward by the committee.
Brexit was mentioned by several noble Lords. The Government will of course continue to assess the impact of leaving the EU on charities and social enterprises, which includes access to future funding. Officials in DCMS are working with colleagues across government to inform plans for future funds, including the UK’s shared prosperity fund, and to ensure that charities are fully considered.
Several noble Lords, including the noble Baronesses, Lady Pitkeathley and Lady Warwick of Undercliffe, mentioned time off for charity trustees. Many public sector organisations and businesses already run impressive volunteering programmes, in the absence of a statutory requirement to provide time off for voluntary duties. This is a matter for individual employers, although we would always encourage them to treat such requests sympathetically.
My noble friend Lord Hodgson talked about the problems with the Royal Albert Hall. I will take his views back to the department but I am afraid that this is a matter, as we know, for the Charity Commission as an independent regulator of charities. We welcome the Charity Commission’s attempts to resolve this long-standing and complex issue and the referral of the case to the charity tribunal to consider specific points of law. I agree that this should bring sunlight on to some tricky legal issues. The point about references to the tribunal is noted.
The noble Baronesses, Lady Prosser and Lady Scott of Needham Market, the noble Lord, Lord Rooker, and my noble friend Lady Jenkin all mentioned core costs. I hear what all noble Lords have said and I think this will come up in the civil strategy. We have to remember that at the moment we are in a time of fiscal constraint, as we know, and price is likely to remain the dominant factor in contracting decisions. But I hear what has been said and this is an important matter. Most noble Lords brought this up in their speeches, which means that we need to take this further and make sure that we listen to what everybody is saying.
Support for small charities was, again, brought up by several noble Lords, including the noble Baroness, Lady Barker. The Government are committed to supporting small charities to become more independent, resilient and sustainable. We encourage all small charities to make their views heard during the civil society strategy engagement. We will work with partners, including the Foundation for Social Improvement, to deliver expert training opportunities for small charities over the next three years.
My noble friend Lady Jenkin talked about the need to explore new funding models. We are already doing this and exploring a new range of funding models. We will take this forward in our civil strategy review.
My noble friend Lord Grade and the noble Baroness, Lady Barker, talked about websites and social networks. Websites and a social media presence are, as we know, a good way for charities to demonstrate their transparency and public accountability. The Charity Commission has done much in recent years to improve the information that is publicly available on the online register of charities and it has recently consulted on changes to its annual return, which would further increase charities’ transparency. We note the committee’s recommendations that funders take account of charities’ transparency when considering requests for funding.
Our civil society strategy will provide a clear vision for the Government’s work with and for civil society. The strategy will reaffirm the value that we place on civil society and explore what more we can do to support its work in building a stronger and fairer society. It will be developed through open dialogue and debate. We are working towards launching opportunities for civil society and beyond to share their views on how government can best support civil society to realise its full potential, and help solve the most pressing social challenges we face. This will involve online and face-to-face engagement activity over the coming months.
All speeches today have mentioned the fact that your Lordships feel that the Government have not responded properly and have taken a long time to do so. All I can say is that in the short time I have been involved in this our Minister, Tracey Crouch, feels very strongly about it. From the meetings I have been in at DCMS, this really is at the forefront of the department’s thinking. The speeches that we have heard today mean that I can take some really powerful things back to the department, which I assure the House I will do.
The strategy will be a vehicle through which we can build on the idea of the shared society, which the Prime Minister has advocated. I think that we will consider ways of tackling all the burning and everyday injustices in society. At its core, the strategy will focus on the following challenges: it will articulate the Government’s vision for civil society in a way that reaffirms the value they place on its role; it will unlock civil society’s potential by addressing the challenges it faces through non-financial governmental intervention; it will set a new framework for effective collaboration between government and civil society to solve the most pressing and complex societal issues. Following a period of dialogue and debate with the sectors, the civil society strategy will be published later this year.
The committee’s report, Stronger Charities for a Stronger Society, has been extremely helpful in setting out a number of challenges. Some of these we are taking forward through our existing programmes and others will form part of the engagement on our civil society strategy. I reiterate our gratitude to the committee for its comprehensive and extremely helpful report. It has helped shape the agenda for the future of our work with civil society. This afternoon we have had a good debate about a vital sector and, once again, I thank all noble Lords for their participation.
Baroness Pitkeathley
My Lords, far be it for me to attempt to sum up the richness of our debate but I thank most warmly all the speakers today. It strikes me that the passion, commitment and concern we have heard from them very much reflects the passion, commitment and concern which is so apparent to anyone who has anything to do with the charitable sector. I remind your Lordships that not only do we here see it as indispensable and something to be proud of; it is the envy of the rest of the world. Anyone who has had anything to do with international work about the charitable movement or the charitable sector knows that other countries envy it very much—its ability to be the voice of disadvantaged people, and to convey that to government in a way which is both innovative and taken up to be formed into other ideas, which form part of our society.
In response to this report, charities have certainly shown that they do not shy away from improving their performance or measuring their impact. They are committed to positive engagement. In thanking the Minister for her courteous and wide-ranging reply, I assure her that I do not doubt her commitment—nor that of the Minister at DCMS—to taking this forward. She has shown a commitment to real partnership and we hope that will continue. We all acknowledge the importance of the strategy which is to be developed, and I assure the Minister that we shall be watching and participating as it is developed.