I recently took part on the Stone King debate ‘To be, or not to be (a registered charity), that is the question’. The debate asked if the traditional charity model can survive into the future.

The 2B or not 2B panel in action

I was on Team 2B (arguing in favour of being a charity) with Children England’s Chief Executive Kathy Evans and Stone King’s Jonathan Burchfield.

I was asked to consider regulation, standards and the voluntary nature of charity trusteeship.

Here’s a summary of what I said.

Regulation and standards

The legal and regulatory framework for charities recognises the importance of charities for associational life.

As the 2017 House of Lords Committee report ‘Stronger charities for a Stronger Society’ says: 

“Charities are the eyes, ears and conscience of society. They mobilise, they provide, they inspire, they advocate, and they unite’.

A charity has, by definition, got to serve a charitable purpose and it has got to provide a public benefit. A charity is therefore inherently outward-focused, and it is required to explain this, making it open to scrutiny.

Despite some of the Charity Commission’s recent comments, charities – collectively  – maintain relatively high levels of trust.

As a whole, charities score well against the drivers of trust that Ipsos Mori have identified and spoken about in their recent report Trust the truth.

Looking at each of those drivers, charities generally:

  • are reliable and keep their promises
  • are good at what they do
  • behave responsibly
  • are open and transparent about what they do
  • are well-led
  • do what they do with the best of intentions
  • share the public’s values (although some charities will do things that some of us will disagree with – there are registered charities both supporting and also opposing abortion to give just one example)
  • do not take advantage of people.  

Because of charities’ status and public benefit, they do not generally have to pay income or corporation tax, capital gains tax, or stamp duty. Gifts to charities are usually free of inheritance tax and they receive rates relief.

These fiscal benefits explicitly recognise the worthiness of what charities are doing and, arguably, help to enable charities’ innovation and creativity.

The framework also means that charities:

  • are often able to raise funds from the public, from grant-making trusts and from local government more easily than other organisations.
  • can reclaim gift aid on many of the donations received from private individuals.

These fiscal benefits can exist because charities are subject to a credible and a robust regulatory regime.

Charities are actively regulated by the Charity Commission in England and Wales, with OSCR in Scotland and the Charity Commission for Northern Ireland performing a similar function elsewhere. The UK charity regulatory model has been held up as a beacon of best practice and it has been copied by other countries.

The Commission is a proactive regulator with a raft of powers. For example, in the last reported year, the regulator:

  • disqualified 21 individuals from trusteeship and removed another 12 individuals as a trustee during an inquiry.
  • proactively exercised its powers to close down charities. One case was the Fazal Ellahi Charitable Trust which was registered in 2003 and ran a mosque in Stoke. The Commission received information that the charity was still operating (despite having been removed from the Commission’s register in 2009) and very serious concerns were raised after an Imam at the mosque was convicted on six counts of encouragement of terrorism. That led the Commission to institute an Inquiry into the charity which ultimately led to them appointing my fellow panellist Jonathan as the Interim Manager of the charity. He distributed its remaining funds to other mosques and closed down the charity properly earlier this year.

Charities’ credibility is enhanced by this regulatory framework – the public welcome the fact that charities are regulated and that there’s the security of a charity registration number.

Charities also operate to high standards beyond minimum regulatory requirements. For example, the Charity Governance Code is a voluntary code setting out good practice and aspirational standards that charities should attain. A new edition was published a couple of years ago and research suggests that this Code is being adopted as the sector norm.

Trustees (Should they be Non-Exec and voluntary or Exec & paid)

Turning to the principle of voluntary trusteeship, the voluntary principle of trusteeship is an important one. It is a key differentiator of charities from other organisations. In overseeing the operation of charities, trustees are genuinely altruistic – they have no commercial interest in or ownership of the organisation.

There is something really good about the fact that trusteeship is a voluntary role, that people do it because they are passionate about what the charity is doing and because they believe in it. Trusteeship is part of the fabric of associational life with, as my fellow panellist Kathy says, trustees making a gift of their time.

This gift should be cherished. But it shouldn’t be regarded as elastic.

That’s not to say that different approaches might now be needed to attract wider and more diverse groups of trustees, such as 

  • Treating trusteeship in the same way as a magistrate with time off granted by employers.
  • As Julia Unwin has recently suggested, providing compensation to people, especially those engaged in the gig and freelance economy, for the opportunity cost that they incur through being a trustee
  • Making sure that trustees are properly enabled to claim relevant expenses to ensure that financial considerations do not unduly deter people from taking up the role.
  • Exploring different ways of holding meetings and of making decisions

Adopting these approaches would be more effective than introducing wholesale payment of trustees if we are to attract and maintain a rich seam of trustees.

That said, we on Team 2B have discussed the issues here, which we acknowledge are very complex. We do have some sympathy for the view that – in exceptional cases – there may be an argument for having some executives sitting on the board of charities alongside a majority of unpaid trustees – we can see that it is unfair that it is the voluntary board of trustees of huge, international organisations such as Oxfam or Save the Children International who are “hung out to dry” in the eyes of the public (or before the Public Accounts Committee) when they cannot possibly have been aware of specific events which have happened within their charity.

However, in conclusion, subject to only a few exceptions, we consider that the voluntary, unpaid nature of charity trusteeship is an essential and distinguishing feature of charities which should be retained.

October 21st, 2019

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