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Cooperatives are enjoying a moment

Once charities were seen as the magic bullet for public service reform. But now their place seems to have been usurped by another part of the third sector: cooperatives.

Last month, Shadow Chancellor George Osborne promised to free public sector staff to form employee-led “John Lewis” style co-operatives and sell their services back to the taxpayer. The Social Enterprise Coalition is right behind the idea.

But while all attention seems focused on the mutualisation of the public sector, some are asking whether it is the private sector that is most ripe to benefit from the adoption of the cooperative ethos and structure. Last month, to rather less fanfare, umbrella body Cooperatives UK called for legislation to give football supporters the right to convert their clubs into cooperatives, provided 75 per cent of season ticket holders were in favour. The market failure which has seen clubs like Portsmouth brought to the brink by reckless owners could be replaced, the argument goes, by genuinely responsible ownership.

Another campaign, run by the Alliance for Finance, is calling for the re-mutualisation of Northern Rock, the building society-turned-bank that sparked off the financial crisis in 2008. Instead of being sold back to the private sector, argues secretary Russell Greig, “the new company could be turned into a community-owned organisation, serving the needs of the communities and able to re-invest in them.”

In their influential new book, The Spirit Level: Why Equality is Better for Everyone, epidemiologists Richard Wilkinson and Kate Pickett argue that “the concept of a company being owned by outside investors has implications that look increasingly anachronistic.”

Citing the success of cooperative experiments such as the huge Mondragon Cooperative group in Spain, they call for tax incentives and legal support to begin a gradual conversion of the economy to employee ownership and control. Much like John Lewis, in fact. Current record levels of inequality would be radically reduced, people would regain the sense of being part of a community, and other social blights such as mental ill health and crime would be alleviated.

The intellectual inspiration behind Osborne’s cooperative proposals is Red Tory Phillip Blond, whose pamphlet, The Ownership State pre-figured the Tory plans. But Blond’s lesser known opponent, Blue Labour’s Maurice Glasman, is also an advocate of mutualisation. He argues that all institutions, public and private, with more than 50 employees, should adopt a new form of governance, giving equal weight to workers, owners and the local community on their boards.

Mutualism could be the idea of the future. Just in more radical ways than George Osborne had in mind.

Parkinson’s UK’s online woes show charities are still struggling with social media

Charities are still floundering with social media. A robust debate that broke out last month on the Parkinson’s UK website forums among its feisty and outspoken members proves the point.

Many of them are expressing dissatisfaction about the charity in more than 230 posts on its public-facing website, and it’s clearly causing embarrassment because chief executive Steve Ford has tried to step in. His solution looks like a desperate attempt at damage limitation.

The catalyst for the thread was the charity’s re-brand, which reportedly cost £200,000 and prompted one member to say her granddaughter could have created a better logo, and another that the slanted angle of the new design will make people want to straighten it.

Charity re-brands are always criticised, but it’s Parkinson’s UK’s public response to this discussion that’s really interesting, because basic mistakes have been made. After the first post – a reasoned, articulate criticism of the re-brand by a member called Wobbly – a forum moderator called Tim left a post that trotted out the charity’s position in corporate-bland lingo. It read as if he’d cut and pasted the press release.

If Tim thought his post would fob Wobbly off, he was sorely mistaken. Post after well-informed post appeared expressing dissatisfaction with his response, and bringing up more and more grievances about the charity’s ‘lack of ambition’ and ‘wasteful expenditure’. To his credit, Ford tried to join in the discussion and answer criticism, but by that time it was too late – it was powering ahead without him.

Now Ford has offered to hold an ‘online meeting’ on 10 March with forum members, which sounds open but actually isn’t. Members wishing to participate must pre-register and the forum will be pre-moderated. His suggestion looks like an attempt to take an embarrassing discussion out of the public arena – another social media mistake – and members are already posting to say ‘count me out’.

The problem with online public forums is that people will use them, particularly if they’re not happy. It’s a mistake to try to fob online critics off with old media-style ‘position statements’, and it’s another mistake to usher inconvenient discussions to a quiet corner, because participants are likely to simply take it elsewhere.

Cancer Research UK’s proposal on Gift Aid reform is by no means perfect

It is good to see Cancer Research UK taking the lead on Gift Aid reform by supporting a 30p composite rate.

It’s an idea that means charities would receive 30p in Gift Aid on every £1 given by a taxpayer, and higher-rate taxpayers would lose the right to claim any personal tax relief on donations.

Progress was needed. Before there can be a sensible debate with the Treasury over reform, there needs to be something to discuss, and the plethora of different options that existed at the start of the year simply weren’t tenable.

However introducing a 30p composite rate would still raise problems. It’s difficult, for instance, to justify labelling a composite rate as tax relief rather than public expenditure.

That’s because the system would mean that if a donor gave £1 to charity, that charity would get an additional 30p even if the donor originally only paid 25p tax to get that £1. Can a tax relief give back more money than the donor originally earned and paid in tax? Or would it have to be called public expenditure?

At present, charities receive 25p as a tax relief on every £1 donation, and then another 3p in public expenditure – transitional relief. That public expenditure can easily be taken away, and in fact it will be in just over a year’s time.

Tax relief, by contrast, is much harder to withdraw, which means that any decision to reclassify Gift Aid as public expenditure would leave the sector vulnerable – and has been ruled out by third sector minister Angela Smith.

It may be possible to label a composite rate as tax relief – an argument between the Treasury and the ONS is going on over this at the moment – but it would not be an easy battle.

It’s also not clear how a composite rate would sit alongside payroll giving. Would payroll giving continue to roll on independently, offering a different system of tax relief to Gift Aid? Or would a giver receive an extra reduction in tax, above and beyond what he paid? Or would it be scrapped altogether? None of these options sound good.

And there is another issue: Cancer Research UK’s plan calls for one major change to the original scheme. Donations over £10,000, it says, should still be treated under the existing Gift Aid regime. This obviously changes the game.

The attraction of the 30p rate is that it’s revenue-neutral for the Treasury. But would it still be revenue-neutral with this addendum?

At present, the Treasury is effectively paying 66p out to donors and charities for every £1 given by a higher-rate taxpayer. If it still had to do that on major gifts, the 30p rate would look a lot less attractive.

If that £10,000 limit wasn’t introduced, though, would the 30p rate still be attractive to charities? Or would it send major donors flocking out the door in droves?

Only one in three givers claim personal relief, but relief is claimed on 80 per cent of the money given.

So relief is obviously valued and well used by major donors. In fact, higher-rate donors are much better at reclaiming tax than charities, who manage to reclaim only 30 per cent of the Gift Aid they are entitled to.

Whatever the eventual decision on a composite rate, however, there are some things which could be done easily. Those things involve streamlining the administration of Gift Aid, rather than a change in the method of distributing it.

Most of them could be done simply, easily, without cost to the Treasury, and without donors even noticing. They’ve already been highlighted in a very good Charity Tax Group report, and in this article, so I won’t list them again here.

Senior politicians were competing to impress charities last night

Loans are all the rage. Last night I joined around 200 people who went to all-hail them at a House of Commons reception organised by the Social Investment Business.

Proceedings were delayed by a parliamentary lobby of hundreds of kindly-looking middle-aged people wearing ‘Homeopathy Worked for Me’ t-shirts, which caused 30-minute delays getting through security.

We were then treated to speeches by not one, not two, but three senior politicians, each trying to outdo the other in their love of loans and charities in general.

First up was third sector minister Angela Smith, who effused about Futurebuilders, the government fund managed by the Social Investment Business that has awarded £125m of loans to charities to help them win public service contracts.

The fund, she said, was “one of the most innovative set up by government and investees had won 230 contracts worth £46m”. After finishing her speech she immediately left.

Shadow Cabinet Office minister Francis Maude then said “a rich and innovative range of finance would be available to charities under a Tory government”.

He said contract bidders could expect more payment by results, with payments coming later rather than sooner, and that loans were a good way of ensuring charities could bid with the big boys. I think this was being presented as good news.

Maude said the proposed social investment wholesale bank “had been in gestation longer than an elephant”, and pledged his party would get on with it. He then left.

Hilary Armstrong, Labour MP for North West Durham and former Minister for the Cabinet Office, topped everyone by saying the sector is “critical to how this country sees itself and how this country can move forward”. She didn’t elaborate on what she meant by this, but she did say social finance was one way of making it happen. And she did stick around to mingle afterwards.

The bullying row and the human factor

There are three aspects to the Gordon Brown bullying row – the political one, the charity one and the one where these two meet. The political aspect attracts most attention, and in it there’s more heat than light – witness the splendid shouting match between journalist Andrew Rawnsley and former deputy prime minister John Prescott on Newsnight last night.

The charity aspect is more serious. By common consent, Christine Pratt of the National Bullying Helpline committed a serious breach of confidentiality by saying people working in 10 Downing Street have called the line. She hasn’t named them, but it’s quite a small group of people.

The Helplines Association and one of the other bullying charities have condemned her actions, three of her four patrons have resigned and the Charity Commission wants to talk to her about the complaints it’s received. It’s hard to see how her organisation can come out of this with much credibility.

Perhaps the most serious allegation is contained in an email produced yesterday by Pratt’s local MP Anne Snelgrove, who is Gordon Brown’s parliamentary private secretary – that callers to the helpline may be referred to other organisations, which includes the HR consultancy run by her husband and fellow trustee David.

The wider issue is the damage this might do to public confidence in charity helplines generally. Most helplines, especially those run by medical and big-name charities, are utterly scrupulous about confidentiality. But anyone can set up a helpline and their standards may not be as high.

The Helplines Association is a self-regulating membership body, set up to ensure high standards with a code of practice and a kitemark.The best outcome for this sector would be for more helplines to sign up to the association and for the public to get the message not to use helplines that don’t carry the seal of approval.

And so to the third aspect, where charity meets politics. Was it a political act, amounting to support for the Conservatives and a breach of Charity Commission guidance? Was she put up to it by a Conservative dirty tricks unit, as implied yesterday by a rather rattled-looking Lord Mandelson? Or was it an impulsive, naive act by an individual, possibly motivated by her own political preferences?

The answer to the first question must be no: she hasn’t specifically supported one party, and could probably put up an argument that the motivation was to help the beneficiaries, even thought the action was misguided. On the second question, the answer must be: unlikely. If the Tories had put her up to this, they would be vulnerable to her turning on them when her predictable come-uppance became complete – and any dirty tricks unit worth the name wouldn’t take that risk.

That leaves the third possibility: the unpredictable human factor, the individual acting impulsively out of an obsure cocktail of motives barely understood even by the individual concerned. And we’ll never really know.

Cashback websites promising charity donations? Don’t get excited

Last week was a busy one for online fundraising.

First, Oxfam announced the launch of Compare for Good, a price comparison website that will donate two thirds of its profits to the charity.

Then ‘cashback’ website Quidco announced it will follow suit. Like Compare for Good, it makes money from commission paid by online retailers for directing shoppers to their sites. It pays that money straight into shoppers’ bank accounts, but soon Quidco will start allowing users to give the cash to charities instead.

So should charities start getting excited about this ‘cash for free’? After all, Quidco claims it could raise £35m for the sector this year.

Well, not yet. Until December last year, the Clever Squirrel website, which reclaims advisers’ fees on insurance policies and other financial products that are sold directly to the public, gave the reclaimed money to charities.

But after it carried out research that found 20 times more people wanted to keep the money themselves than have it given to charity, Clever Squirrel started giving the money straight to individuals. Since then, it has seen its number of users skyrocket.

The Giving Machine, a site similar to Quidco that lets users give part of the commission payment to a school or registered charity, proves a similar point. Users can’t keep the ‘free’ money for themselves, but the majority choose to donate it to local schools rather than charities – presumably to help their own children.

The theory behind these sites is that if people are offered money for free, they’ll be happy to give it away. But it seems most people are not. Whether due to greed, hardship or a mixture of both, members of the public want to keep all the money they can get.

So I’d be very surprised if a lot of people started giving away their Quidco cash. The Compare for Good model, which doesn’t let users keep the money but does offer them a useful service, looks more viable for the time being.

That is, until another price comparison site starts putting its commission payments back in shoppers’ pockets.

Was this the Charity Tribunal’s last hurrah?

The final outcome of the Kidd Legacy case, announced by the charity tribunal on Wednesday, looks like a very satisfying one – but you can’t help fearing that there might not be many more where that came from.

In many ways the Kidd Legacy appeal is a shining example of what the tribunal was set up to do. In a classic David versus Goliath case, two local residents, without legal representation, were able partly to overturn to Charity Commission’s response to Dartford Borough Council’s inadvertent sale in breach of trust of charitable land to a developer associated with the Tesco supermarket giant.

It also looks as if the result will be a model code of conduct on conflicts of interest for councils that act as sole trustees of charities. Given all the recent controversy surrounding council administration of charities, that must be seen as a very welcome development for the entire charity sector.

But the question that demands to be asked is whether this might also be the tribunal’s last hurrah. It is resourced for 50 cases a year and, after a slow start in 2008, its workload was expected to have picked up by now. But that has singularly failed to happen. After last week’s decision to strike out African Aids Action’s appeal against the findings of a commission inquiry, the tribunal currently has precisely zero cases on its books.

Not only that, but the word about the value of the tribunal does not seem to be getting out. The commission’s decision to reject the Gnostic Centre’s application for charitable status was “begging” to be appealed to the tribunal, according to third sector columnist and charity lawyer Rosamund McCarthy. But the charity preferred to submit a revised application, fearing the cost and possible negative publicity of a tribunal appeal. Nor did the commission see fit to “refer” any of the highly nuanced points of law involved in that case to the tribunal for clarification, as it is permitted to do – provided the Attorney General agrees.

Charity lawyers are holding their breath to see whether any of the fee-charging schools that failed the commission’s public benefit assessment last summer refuse to comply with regulator’s directions to pull their socks up, triggering an order that they could then appeal against to the tribunal.

Such a case would certainly thrust the tribunal well and truly into the media spotlight, but so far, the schools have indicated that they are prepared to do as they are told.

Besides, such an appeal would not be heard until the end of the year at the earliest – by which time the bell may already have tolled for the tribunal. The Scottish Government has already decided to chop the tribunal’s Scottish equivalent, the Scottish Charity Appeals Panel, after it heard just one case in three years, and we all know that the next government, whatever its colour, is likely to seek out things it can cut without attracting huge, negative headlines. An obscure, over-resourced tribunal that has only heard three full cases in nearly two years seems like an obvious target. So – alas for the sector – the Kidd Legacy case might well become the symbol of what might have been for the charity tribunal.

Charities should be more than an afterthought when politicians talk tax

Among the ideas
in the Charity Finance Directors’ Group’s election manifesto is one for establishing a
review panel to scrutinise new legislation
at an early stage and find out whether it will throw a giant spanner into the works of
the charity sector.

The benefit of this proposal is obvious: every time the Government introduced a new tax, the charity
sector would not have to fight tooth and nail to avoid shelling out huge
amounts of cash.

At present, what
seems to happen is that any new bill is already well on its way through the
Houses of Parliament before someone asks if it should apply to the charity sector,
and changing it then becomes an uphill struggle.

We witnessed this
problem last year as the battle to exempt the third sector from the community
infrastructure levy
played out in the House of Lords.

The legislation, which
affects the construction of new buildings, initially contained no exemption for
charities, and would have scuppered an awful lot of charitable developments.

A group of largely
unsung charity campaigners fought what one of them described as “the bitterest
battle I’ve ever had” to win even limited exemptions.

Most of that battle
seemed to be necessary only because the Government was already well down the
line with its plans for the levy and didn’t like being forced to back down.

Lord Phillips, one
of the peers who supported charities in this campaign, emerged from it pretty
angry. “I thought there was a single concordat across the political divide that
charities were not taxed,” he said. “That concordat has been broken.”

These are fine
words. The truth is, though, that this concordat gets broken all the time. Government
tries to weasel out of it every day.

Charities pay lots
of tax, including anything up to £1 billion in VAT, as well as national
insurance, water rates, and others. And that burden threatens to increase every
time a new tax or a new piece of legislation is applied, largely because no one
thinks about the charity sector.

How much better
would it be to have a body within Government, which considered charities’ needs
early on, and wrote in an exemption for the third sector before the months of campaigning?

What’s going on at The Alzheimer’s Society?

Few articles in recent months have generated as many heated calls and emails to Third Sector as the restructuring at the Alzheimer’s Society.

The society, like many charities, wants to win more public sector contracts and the Department of Health’s publication last year of the first-ever National Dementia Strategy for England makes now a good time to act.

It seemed sensible for the society, which currently gets about 35 per cent of its income from statutory sources, to review its national structure to show funders it is modern and accountable.

The strategy seems fine, but it looks as if something might be amiss with the execution.

The main complaint is about the society’s decision to merge 240 local branches into 49 regional centres. Its leaders says the malcontents simply don’t like change, and in some cases that might be right. But disillusionment and discontent appear to run deep.

Stalwarts from the frontline, such as Ernie Thompson, who helped to found the Sunderland branch more than 20 years ago, and Roger Newman, who was awarded an MBE for his work helping Alzheimer’s sufferers, say they feel sad and angry about events and don’t feel they belong to the new structure. Ernie and others have even set up rival dementia charities to restore a local flavour to fundraising.

Amidst all this Neil Hunt, the charity’s chief executive, has left at short notice without having a new position to go to. The charity declines to talk in detail about reasons for his departure.

It’s ironic that a charity trying to become more accountable has so little to say about Hunt’s departure. But the departure of many loyal volunteers, who feel so alienated by what’s happening that they are turning their backs on the new structure, is a matter that can’t be ignored.

Telephone fundraising might not be pleasant – but it works

Charity call centre scandal, screamed a headline in the News of the World last Sunday. The paper had sent an undercover reporter to a training session for callers at telephone fundraising agency Pell and Bales.

It accused Pell and Bales of using “shameless tactics” to “generate money from the jobless, frail and even sick.” The company’s training manager, Travis Hodges, is reported to have told trainee fundraisers that “if someone says they’ve just been made redundant, it doesn’t matter. For all you know they might have just got a huge pay-out!”

It said bosses monitored calls and reprimanded staff who didn’t ask for money enough times.

The article also accuses the firm, which last year agreed to end its practice of making ‘administrative’ calls to people who had asked not to be contacted, of calling people registered with the Telephone Preference Service.

If true, the newspaper’s allegations suggest that Pell and Bales is breaking the law and the Institute of Fundraising’s code. But Derwyn Jones, chief executive of the Panther Group, which owns Pell and Bales, told Third Sector the firm only called TPS-registered people if they were existing supporters of the charity and had agreed to be contacted.

He said it was difficult to strike the right balance between motivating staff to meet their targets and making them feel comfortable about their work.

“Charities have invested money in telephone fundraising and they need to get a good return on their investment,” he said. “And raising money over the phone is a difficult job, which a lot of people are not suited to. But we draw the line at bullying staff.”

The Institute of Fundraising and the Fundraising Standards Board will hold a meeting next month to clear the air about telephone fundraising. Charities, fundraising agencies and representatives from the Information Commissioner’s Office will gather to clarify the legislation and the best practice guidelines on the subject.

But will this work? It’s perfectly possible that Pell and Bales has done nothing in this case that is illegal or against any codes of practice – but it still ruffles feathers.

The truth is, telephone fundraising, like face-to-face fundraising on the street, is a difficult job and is inevitably driven by targets – which put staff under pressure to raise funds.

And, by and large, it works, raising millions for charity. A telesales culture in fundraising agencies might not be pleasant, but there’s not much any regulator can do to stop it.