Stronger Charities for a Stronger Society (Charities Committee Report)

Baroness Warwick of Undercliffe Excerpts

Tuesday 16th January 2018 Lords Chamber

[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?