Problem about measuring charity efficiency won’t be easily solved

Several people in the charity sector have taken the opportunity afforded by the cap on charity tax reliefs recently to have a go at the sector, and whether all charities really deserve the reliefs they have.

The first complaint is about the use that charities put their money to. Should you really get tax relief for giving money to the opera, or Eton, rather than paying for essential services provided by the state? Shouldn’t we have one law for charities doing important stuff – helping the disadvantaged – and another for people doing frivolous nice-to-haves – the donkey sanctuaries and whatever?

The second is related, and concerns value for money. It suggests that we should have some sort of measure of how effective a charity is before it gets a tax break.

The trouble with the first argument is one of degree. Where do you draw the line? At the moment we’ve drawn it in one place, after much long debate, and it’s led to the public benefit laws. These were long, complicated and difficult, and don’t work very well.

To then try drawing another line, in another place, to separate charities into A and B streams, sounds hideously complicated, especially because we get into value judgements pretty quickly. You can put animal charities, for example, in the secondary modern stream and “relief of poverty” charities in the grammar school stream. But what about the PDSA, which argues it relieves poverty by taking care of animals? What about the RSPCA, which is providing services the state would otherwise have to provide?

What about education charities? People feel Eton and the Royal Opera House shouldn’t count. But obviously a school for special needs children shouldn’t be restricted. And what about the Royal Opera House’s programme to teach music to disadvantaged children?

After all, let’s not forget the state does spend money on the arts – it gave the Arts Council alone more than £600m of taxpayers’ money last year. Surely the argument that arts charities don’t deserve tax breaks only works once we’ve stopped spending any actual tax on the arts directly.

The question with the second argument is one of measurement. Who decides what efficiency looks like? How efficient is efficient? Are we going to rely on an SROI measure? Are we going to apply it to every charity in the UK? What’s the basis for comparison? It seems pretty fruitless comparing cats with cancer and cancer with ex-cons.

It sounds, in short, like the kind of activity which would generate an awful lot of heat, but not much light.

In any case, it doesn’t really matter. All you’ve got to prove, in efficiency terms, is that most charities use tax money more efficiently than most government agencies. And that seems to me to be setting the bar pretty low. Almost anything is more efficient than a government department.

It would be nice, in short, if we could reward the most effective people, doing the most important stuff. But someone’s got to decide who that is, and how it’s measured. I know a few people who’d like to volunteer for the job of deciding that. But oddly enough, they all seem to think their own cause is best.