Latest insights from our experts

Posted 30 January 2017
by Leanne Yendell

To charge, or not to charge – that is the question



The question has been lingering for some time, but William Shawcross, chair of the Charity Commission recently announced that he “is convinced” that levying a fee on charities “the only way to secure adequate long-term funding for the Commission and to develop key resources”.

His rationale is understandable – there is a widespread view that the Commission simply does not receive enough funding to regulate the sector effectively and provide meaningful guidance and support to charities.

Government funding for the Commission has been halved since 2007/2008 and is currently frozen until 2020.

The debate however focuses on who should fix the funding shortage. Is it the Government’s responsibility (and recently the Prime Minister taking a break from her Brexit battles – gave a promise to support and champion the sector in her vision of a ‘Shared Society’ despite no mention of hard figures) or is it the responsibility of charities to use funds intended for charitable purposes to pay for their own regulation?

The ‘pro-levy’ camp would say that the estimated £5 million in contributions generated in the next two years would keep the Commission afloat, facilitate the setup of additional support and guidance services (yes please!) and not hit the smallest charities financially as they would be unlikely to be required to pay. It could also boost public confidence knowing that the Commission is sufficiently resourced to act as an effective regulator.

However, there are serious concerns (raised for example, by the Charity Finance Group) that paying for services would put into question the independence of the Commission. Also, larger charities who may be required to contribute more, may expect additional benefits in return for their fees and so smaller charities could be downgraded. It has also been argued that there would be inefficient ‘start-up’ costs for the Commission to develop the required systems and so counteract any immediate benefit, and a modest increase in direct Government funding, which would be tiny in the overall budget for public services, would be better value for money.

Irrespective of side it is vital there should now be a formal consultation on this issue, rather than a continuation of the ‘informal’ soundings carried out by the Commission to date.

Timing of any formal consultation remains uncertain and indeed the Government’s formal position on charging remains unclear. It was widely expected that there would be an announcement as to a formal consultation by the end of January but this has now been delayed as HM Treasury have not given the green light to the Commission to proceed whilst various options are considered.

Charities will therefore be looking for clarity on this issue as soon as possible but there is a lingering concern that Mr Shawcross has already made up his mind that charging is the answer.

Whatever happens it is clear that the 2017 certainly won’t be a quiet one for the sector and we will be sure to keep you updated.

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About the author

Leanne Yendell

Paralegal

Paralegal in our Company and Commericial team at our Exeter office