Charity Sector Funding: Transparency

Wednesday 1st March 2023 Westminster Hall

11:00

[Mr Philip Hollobone (in the Chair)]

We now come to an important debate on charity sector funding, and I call Craig Mackinlay to move the motion.

[Craig Mackinlay (South Thanet) (Con)]

I beg to move,

That this House has considered the transparency of charity sector funding.

It is always an enormous pleasure to have you chair a debate, Mr Hollobone.

The charitable sector has a long and proud history, with truly ancient charities still very much in existence, in particular in education and the almshouse sectors. There was a huge blossoming of philanthropy in the first Elizabethan period, and much of that tradition continues today, with service clubs, the Round Table, Lions Clubs, the masons, the Rotary and many thousands of other organisations, working daily through charity shops and a host of other activities to raise funds to assist in domestic and international projects, in particular at times of emergency, which we have seen in the situation in Syria and Turkey at the moment.

Domestically, charities have often filled gaps in society that Government could not, or perhaps should not even attempt to. We can safely say, however, that that has blurred over time, as we have moved to a situation where the demands and expectations of modern society are for the Government to meet and they are expected to solve, frankly, everything.

One of the oldest educational charities, the King’s School in Canterbury, which is just a few miles over the border from my constituency, dates back to AD 597, now faces threat after nearly 15 centuries because of Labour’s ambitions to tax such providers and users of education. I have numerous independent schools in South Thanet, the largest possibly being St Lawrence College, which is similarly under threat because of political game-playing and the usual politics of envy. I have called the debate not for that reason, but to question whether in some cases the “charitable” tag, with its incumbent benefits, is being stretched beyond credibility.

I have a number of strands for the Minister to consider. First, my fear is that too many charities, often financed by vast Government—that is, taxpayer-supported—grants that run into multiple billions annually are straying into the political arena. That is particularly true of many charities in the refugee and immigration sphere. I note one, Care4Calais, which receives no direct Government funding that I can see. However, there is complete opacity that I could not penetrate as to where its £1.6 million of funding—according to its most recent accounts—comes from.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for securing the debate. We all want to ensure that our charity giving goes where we expect it to go. As he may be aware—this is factual, not me saying it for the occasion—Northern Ireland is the most generous nation per capita in the world. This matter is therefore incredibly relevant in my constituency. Does the hon. Gentleman not agree that when people donate money after they see a registered charity number, there is a belief that the charity is accountable and that accountability means transparency and simple access to the accounts and spendings of any charity?

[Craig Mackinlay]

The hon. Member is quite right. That imprimatur of a charity registration number has always given people confidence that the charity has charitable aims and is being looked at properly by the Charity Commission and others, and it is often the reason that people are willing to give to such charities. I also note the extensive charitable sector in Northern Ireland.

Where does the income of many charities come from? It might often be from another charity, higher up the chain, which is a key thread in what I want to discuss. I note, too, that that Care4Calais charity has been under investigation by the Charity Commission since August 2020, but with no outcome as yet. We are getting towards the three-year anniversary, which in itself I find quite remarkable—the case of a £1.6 million institution is patently uncomplicated, and that leads to questions about the Charity Commission’s competence and ability to investigate properly.

Refugee Action received £2.2 million in Government grants and contracts in its accounts to March ’22. The British Refugee Council received £7.5 million in Government grants and contracts. That is close to half its revenue, yet I find that those selfsame charities, and many more, put up commentators to attack the Government—I have faced them regularly on the media—and in some cases take the Government to court on various migration issues, particularly the Rwanda situation. Care4Calais and Detention Action have got themselves involved in those activities.

I have no issue at all with whichever person, company or entity wishes to take the Government to court—that is a strength of our system that we do not see everywhere in the world—but the question for the taxpayer is, should such action be taken under the auspices of a charitable organisation whereby the donors receive tax relief, or indeed taxpayers themselves are in the funding chain?

Let me analyse what happened during the covid support period. There was £1,570 million—a truly exceptional sum—of Government funding under the culture recovery fund. That was distributed by the Arts Council. I found it bizarre at the time, although I do not know what other Members thought, that we were all provided with embargoed lists, which were provided at the same time to local media, yet we had had no input whatever to the grant allocation or the consideration of the suitability of the recipients, although we MPs have unique local knowledge of our patch.

I saw on those lists various institutions, charitable and commercial, in South Thanet that are often in receipt of five-figure grants. Looking through the list, I saw that they were often the same institutions that had been driving very unpleasant social media against me over long periods, some of it quite vile. This was overly political, and, bizarrely, these institutions are willing to bite the hand of the Government who are feeding and supporting them.

There is one local institution I would like to note, which is Faith In Strangers, in Cliftonville in my constituency. It achieved a planning consent for a venue based on a community workspace with incidental community music opportunities. Since then, that has shown itself to be nothing but a sham, and it has morphed into a full-on, late-night drinking and music venue. It causes so much noise and interference with long-term residents who live above that many have had to move out. One has taken to living in a camper van. This has rendered their life investment worthless.

To its credit, Thanet District Council initiated a licensing hearing on the venue. I invested four hours in assisting residents and making representations myself at the hearing, but this institution, Faith In Strangers, employed one of the most expensive, hugely skilled and, I have to say, very impressive licensing barristers in the country, and was supported by a local Labour councillor, who sided with a corporate nightclub over local residents. It was truly shocking. That private company received £160,000 across the two tranches of the culture recovery fund, and a further £5,000 from the Music Venue Trust—another charity in receipt of direct Government grant funding.

Let me summarise what we saw during that period. This was just in my constituency; there must be similar stories across the country. Taxpayers money, via Government grants, financed institutions with an overly anti-Government leaning, which loudly expressed their views, and funded institutions that had been making the lives of local people a misery. Those institutions then employed top notch legal support to quash residents’ objections, which left me, the local MP, to try to pick up the pieces.

While many charities take care not to suggest who people should vote for, and hence have not come to the notice of the Electoral Commission—I must declare that I am a member of the Speaker’s Committee on the Electoral Commission—the activities of many of these charities are, by negative inference, hinting that a vote should not be cast for the Government in power.

There is an increasing case for the Electoral Commission to look more closely at the activities and pronouncements of many of these charities—not just on the issue of asylum and immigration, but more widely—when there is an obvious straying into politics. I am sorry, but that would have to apply to those charities that many of us would deem very good. Let me mention the Trussell Trust, for instance.

I have collected with the Trussell Trust, particularly at Christmastime—I am sure most Members have, and are very supportive of its aims—but I am increasingly worried as to its true objectives. I met the then chief executive officer at a parliamentary reception for the Trussell Trust back in 2016; I was, indeed, younger and a little more naïve in those days. As a chartered accountant and chartered tax adviser, I proposed a scheme to the CEO that could be put to His Majesty’s Revenue and Customs to allow gift aiding of the food donations received under the gift aid small donations scheme. That could have triggered a 25% cash top up under the scheme. I followed the proposal up with the CEO, sending a detailed letter offering my services pro bono to promote a means by which such a scheme might be accepted by HMRC. I received no reply.

I am a big supporter of the founding ambitions of the Child Poverty Action Group, and I always buy its annual book, “The Welfare Benefits & Tax Credits Handbook”—it is an invaluable tool for my caseworkers. The group received close to £1 million in Government grants up to March 2022, and it is a very worthy organisation. However, I am afraid that the Government are often at the receiving end of very political campaigns. I do not know about the Minister, but I receive various campaign emails that the organisation promotes to its subscribers—standard form emails that we receive on a daily basis. That is purely political campaigning.

The Charity Commission does disclose Government grants received. There is a snapshot on the front page of the financial affairs of any charity one searches for, but it is rather opaque. As ever, I thank the House of Commons Library—it gathers a wealth of information for us, and as an institution it is unrivalled on the planet—which has tried to pull together various sources, public and other. It has become clear, however, that in the charitable sector, which now runs to many tens of billions of pounds a year, it is very difficult to find the true ambitions of many charities or their sources of funding.

The second strand of my debate is sub-funding by super-sized charities to non-charity organisations, or even to smaller charities down the chain. In those instances, the opacity becomes truly muddy, and I feel it is a means of directing overtly political funding. Stop Funding Hate led a campaign to put pressure on advertisers not to advertise on GB News when it started. Stop Funding Hate is not a charity, but a community interest company. It received a £50,000 donation from the huge Joseph Rowntree Foundation. Following the concerns that I raised with the Charity Commission, a review was undertaken, but it was decided that the aims of the Joseph Rowntree Foundation were within scope to allow such funding.

Let us stand back a bit, because I find that rather bizarre. A charitable institution advanced funding to a non-charity to put pressure on potential corporate advertisers not to spend money with a duly UK-licensed TV channel that it simply did not like. There is virtually no way of shining a light on the extent of this channelling of funds from charities to non-charities. For the first time in my experience, the House of Commons Library were similarly stumped by this inquiry.

My third strand is about the fact that, although Government grants are visible—albeit with some difficulty —local government gives huge amounts to the charitable sector. I have no particular issue with much of that; for instance, the bedrock of funding for Age UK is often via county and unitary authorities. But it is very difficult to find the amounts that are going through local government, unless one takes the trouble to trawl through the register that has to be published of spending over £500 within any council. My fear is that taxpayer funding is routinely channelled to chumocracy charities at the local level, virtually out of plain sight.

On this point, I will refer to Ramsgate Town Council. It has channelled taxpayer funds—small amounts here and there—to so-called charities and community interest companies, for which I can perceive no objectives for public good except that they are often chums of local Labour councillors. I raised that in relation to a project some weeks ago called the Ramsgate Arts Barge, which has received funding from Ramsgate Town Council. I am a local taxpayer, and some of the precept that I pay goes to Ramsgate Town Council. Its latest accounts for the Ramsgate Arts Barge show the balance sheet in deficit, but the mere airing of my concerns, as a local taxpayer, elicited an outraged call from one of its directors threatening me with legal action.

Let me summarise that point. Taxpayer funding through local councils supports various charities. A local MP and local ratepayer who pays for all of that gets threatened with legal action for even querying whether such taxpayer funding—my funding—represents value for their local taxpayer pound. Thank heavens that I have legal privilege here today.

The Commons passed the Economic Crime and Corporate Transparency Bill a few weeks ago to provide greater disclosure of the ownership of entities and sources of funding, and the Bill is now in the Lords. We have increased the reach and activities of the Electoral Commission to ensure that all political funding that is designed to influence voters positively or negatively is open, transparent, published and backed up by the rule of quite stiff law. Yet we allow the charitable sector—unaccountable and hidden, but very influential and in receipt of vast amounts of taxpayer funding—to continue pursuing, in many notable cases, anti-Government activity to overturn the will of Parliament and attack legitimate and registered businesses that it has decided that it does not like.

This is an area of grave concern. I have been thinking about it for some years, but a number of things have come together to cause me to want to air it in this Chamber. I ask the Minister for new transparency rules throughout national and local government; that we publish amounts granted to charities in a clear way; and for proper disclosure of amounts granted down the line from charities to other charities and non-charities. I ask for the Electoral Commission to look more closely at the whole field of political campaigning that is done under a charitable umbrella.

In my view, the charity commissioners need to take a firmer view of core charitable activities. On behalf of taxpayers, I ask whether it is wise, fair or value for money for Government to pass billions of taxpayer funding annually—outside of core contracts, which are a slightly different issue—to the web of charities that now constitute a £50 billion-a-year industry and have well-paid CEOs and boards.

I fear that the charitable sector is the new area of non-transparent activity and funding. I am in favour of transparency; transparency is good, and it shines a light on activities. As an accountant, I always say, “Follow the money.” I welcome anything the Minister might say on this, but I certainly hope that the Government will agree with my view and take action.

11:18

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay) for tabling this important debate on the transparency of charity sector funding.

The transparency of charity funding forms a central tenet in enhancing public trust in charities. I am delighted to have the opportunity to discuss this important issue and to highlight the regulatory framework in which charities operate. It is this framework that provides transparency about where a charity’s funding comes from and how it is spent.

I acknowledge, as other hon. Members have, the huge contribution that charities make to the lives of individuals and communities up and down our country. There are over 169,000 charities on the Charity Commission register. Those organisations operate in areas as diverse as education, religion, sport, health, the environment, heritage, and arts and culture. My background in the charity sector makes me proud of its contribution to our society. The vast majority of charities are small in scale, operate on modest incomes and are run by passionate volunteers who are committed to helping others in their local communities, as the hon. Member for Strangford (Jim Shannon) mentioned in relation to Northern Ireland.

The charity sector’s income comes from a wide range of sources, including public donations, trading activities and Government grants and contracts. Therefore, the scale of the sector’s finances necessitates strong, robust and independent regulation to ensure that funds are properly accounted for. In England and Wales, the role is carried out by the Charity Commission as the independent registrar and regulator. By ensuring that the sector is well regulated, the public can have trust and confidence that their generous donations are spent appropriately.

Members will know that the Charity Commission is an independent non-ministerial Government Department. It is answerable to the courts for its legal decisions and to Parliament for its work. The chair of the commission, Orlando Fraser, has spoken about his focus on charities’ legal compliance and their accountability to the public for the money that they receive.

The Charity Commission plays an important role in ensuring that charities act within charity law to further their charitable purposes. All registered charities with an income of more than £25,000 are required to submit annual returns and accounts, including a trustees annual report, containing information about finances and activities. That enables the public to understand where a charity’s income has come from and on which activities it has spent its funds. The register of charities gives assurance about and transparency over the more than £80 billion of annual income across those charities.

Public trust in charities remains higher than in most other parts of society, and that is a reflection of the value the public thinks that charities can bring. Charities are such an important part of society and I share the wish of my hon. Friend the Member for South Thanet for them to be proactively transparent in how they use their money.

Unfortunately, there are a small number of cases of deliberate abuse of charity or serious mismanagement that puts charitable assets or beneficiaries at risk. In these cases, the commission has broad powers to intervene, investigate and take appropriate and proportionate regulatory action, ensuring charitable resources are used properly for the purpose for which they were provided.

However, I would point out that the Charity Commission is a small regulator with limited capacity and funding. It must therefore prioritise its resources where they will have the greatest impact. If hon. Members have any concerns that charities are acting outside of their charitable purpose, they should absolutely raise them, as my hon. Friend has done, with the Charity Commission. The size and scope is obviously something hon. Members may wish to consider.

Funding other charities and non-charitable organisations can be an effective way to further a charity’s purpose. However, charities must only fund activities that further their charitable purposes, and trustees must ensure they take steps to protect their charity’s assets and reputation.

I am aware that Members have expressed concerns about the campaigning activities of certain charities. It is important to stress that non-party political campaigning can be a legitimate way for charities to spend their resources, so long as they act within charity law. The law is clear: to be a charity, an organisation must exist only for charitable purposes. A political purpose is not a charitable purpose and therefore any organisation that has political purposes cannot by any degree be a charity.

However, charities can engage in political activity that is actively intended to change or influence decisions taken by the Government where it helps deliver the purpose of the charity—for example, a health charity could engage in political activity for a change in a policy on a particular health issue if doing so furthered their purposes—but charities are prohibited from supporting political parties or politicians, and where they engage with political parties, charities must take a balanced approach. If concerns are raised about a charity’s campaigning or political activity, it is of course right that the Charity Commission assesses those concerns and determines whether regulatory action is required. To help trustees understand the rules, the commission recently published an accessible five-minute guide. The guide supports its long-standing and longer-form guidance on this subject, and it is known as CC9.

Fundraising is a key source of income for charities. As my hon. Friend the Member for South Thanet mentioned, the generosity of the public is evident in appeals such as the Disasters Emergency Committee’s Turkey-Syria earthquake appeal, which has already raised more than £100 million. Again, because of the scale of fundraising, a strong regulator is required to promote best practice and assess concerns. That is why, in 2016, following a cross-party fundraising review, the Fundraising Regulator was established as the independent regulator of charitable fundraising.

While a significant amount of the sector’s funding comes from donations, some charities receive Government grants and contracts to deliver important public services, such as healthcare and addiction services. However, it is important to note that nearly two thirds of charities do not receive any funding at all from the Government. To ensure that taxpayer money is well spent, Government grants must comply with the grants functional standard, which requires due diligence to be undertaken on all potential grant recipients before an award is made.

There are also strict rules preventing taxpayer money from being used on lobbying or political activity. Such funds must be used only for the purposes set out in the grant agreements. The Government are committed to their transparency agenda, and annual statistics for all grants distributed by the Government can be found on gov.uk. Members of the public can search for grants awarded to charities by downloading the latest grants tables and filtering by a charity’s registration number. However, I hear what my hon. Friend says about how easy or accessible that is, and I commit to looking at that to ensure we are getting it right.

I would also say that some campaigning done by charities has improved public policy—think of the Royal Society for the Prevention of Accidents, whose campaigning brought about legislation on the wearing of seatbelts—and no one would argue against that. What has changed in recent years is that debates have been polarised or divisive. My hon. Friend has raised a number of examples today, which I cannot comment on specifically right now, although I assure him I will look at them and write to him.

It is clear from today’s debate that we share the same ambition to ensure charities continue to be supported through effective regulation. As I have highlighted, there are a variety of ways in which charities can demonstrate transparency in their funding and compliance in their use of public funds. I have heard my hon. Friend’s concerns today, and I commit to raising them with the chair of the Charity Commission at our next meeting. In closing, let me once again thank my hon. Friend for securing this important debate and all in attendance for such a valuable discussion. I commit to coming back to him as soon as possible.

Question put and agreed to.

11:27

Sitting suspended.