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Amalgamating dormant funds is sensible, even if it means Aberdeen’s aged virgins lose out

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Last week, Aberdeen City Council announced plans to amalgamate 41 charitable funds, including one established in 1634 for the benefit of “aged virgins” and another set up in 1718 to aid “persons deprived of the use of reason” –  a brilliant phrase indicating that political correctness was alive and well in the 18th century.

These funds, all of which hold less than £20,000, will be amalgamated into a fund worth around £130,000, which will be spent for the good of the people of Aberdeen.

It’s not a huge amount, but it’s a lot better than nothing, and there’s every reason to suggest that similar funds are out there, held in trust by every council in the UK. If Aberdeen is typical, there could be many thousands of charitable bequests like this that could be hoovered up to be used for the good of the people.

Decisions like Aberdeen’s are increasingly common in Scotland, but are unlikely to be replicated south of the border, because of a difference in charity accounting. Every charity in Scotland, no matter how small, has to submit accounts to OSCR, meaning that suddenly, councils have discovered a responsibility to submit accounts for scores of charitable trusts with negligible assets and wholly outdated objects, such as the preservation of horse troughs, the provision of fish on Fridays to the deserving poor, and the upkeep of elderly virgins.

In England, these charities are exempt from submitting accounts, and this money is likely to remain unused, and in the hands of councils who do not even know about it.

It has not just affected the smaller funds, either. In other cases, the OSCR says, it has reminded councils of their duty of trusteeship of much larger charities, and has allowed OSCR to suggest to them that a more effective model of governance would serve those funds better.

While it seems over the top to change charity accounting practices just to encourage good trusteeship on the part of councils, the effectiveness of this by-product of OSCR’s policy suggests it might be worth looking at how to encourage councils in England to put the resources they hold in trust to better use.

HMRC doesn’t trust charities

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It is difficult to believe that HM Revenue & Customs likes charities very much.

Looking at the sector through the eyes of the taxman, charities are walking liabilities, profiting from generous tax breaks, but poorly-regulated and badly in need of a firm hand.

The taxman has glimpsed in the current laws potential for charities to perpetrate vast and shadowy tax frauds, and as a result has lobbied for increasingly arbitrary powers to ensure that charities cannot acquire any benefit without running it past HMRC first. Even though there is no evidence that fraud is rife in the sector, HMRC appears worried that it could break out, at any second, like measles.

The lack of trust in charities, and in the Charity Commission as their regulator, was made evident four years ago with the introduction of substantial donor legislation, a laughably ill-considered and wholly unenforceable scheme requiring charities to ensure they did not make any payment to any family member or business partner of any major donor for a 17-year period.

It has been seen again in two new pieces of legislation. The first is the fit and proper person test, which gives HMRC carte blanche to refuse tax breaks to a charity if it feels any trustee or senior manager is unreliable. The second is a rule giving it the power to declare any expenditure abroad by any charity to be non-charitable, and therefore subject to tax, if it believes proper steps have not been taken.

All three pieces of legislation have several things in common: they are wide-ranging and could affect any charity; they require lots of work from the sector; and they lay the burden of proof squarely at the door of charities, who must show they did nothing wrong.

The taxman will defend all this as reasonable and necessary to prevent crime. HMRC says that it will use its new powers fairly, honestly and transparently, and that those powers will have no effect on the law-abiding.

The question, in the end, is whether we trust them.

Large charities win contracts, but how does that square with big society rhetoric?

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Are small charities better than big ones? Few questions provoke more ire.

Stephen Bubb, chief executive of Acevo, says it is a “senseless and divisive argument”.

But the new government seems to be following the path trodden by Iain Duncan Smith five years ago when he contrasted “bureaucratic and risk-averse” big charities with “the instinctive understanding” of small, local groups.

It was noticeable that small groups, rather than the sector monoliths, were invited to Downing Street to discuss the big society last month.

This month, Francis Maude, Minister for the Cabinet Office, said the new Communities First fund would be “super-local, seriously neighbourhood-based and almost microscopically granular”.

I’m not quite sure what he meant but it didn’t sound like an invitation to Cancer Research UK to apply.

Yet charities still face pressure to get bigger and more centralised if they want to tango with the government.

The Alzheimer’s Society is a high profile example. It has tightened control over local offices, which has upset some volunteers but was done to improve accountability and enable the charity to win more contracts from the government.

I interviewed Jeremy Hughes yesterday, who, it was announced this week, is leaving Breakthrough Breast Cancer to become the society’s chief executive. He thinks cancer charities’ model of closer collaboration with government is the way to go if you want to win contracts and influence people.

It’s difficult to argue with that, yet it’s hard to see how it squares with the ‘big society’.

Like it or not, I suspect the size issue will be one of the key themes of the years ahead.

The government’s decision on Refugee and Migrant Justice is reminiscent of the Thatcher years

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David Cameron spent a lot of time in opposition playing down comparisons between his politics and those of the Thatcher government. When he came into power in coalition with the Liberal Democrats, it seemed their influence might strengthen the government’s credentials on social justice.

Now, a few weeks into the new regime, a junior minister in the Ministry of Justice, Jonathan Djanogly, has confirmed the petty and misguided decision to force Refugee and Migrant Justice into administration by refusing to help it through £1.8m cash crisis caused largely by the ministry’s own delays in paying legal aid fees owed to the charity. The decision comes as we hear that legal aid to senior counsel in the Bloody Sunday inquiry totalled £100m.

Ken Clarke, Lord Chancellor and Secretary of State for Justice  has not seen fit to intervene, despite his credentials as a fair and sensible poltician, and there has been no audible protest from the government’s big society advocates, despite their rhetoric about the beneficial role of charities in society. Not a word, either, from the Liberal Democrats.

So what is going on? RMJ is widely acknowledged to have unrivalled knowledge of asylum law and to be cheaper and better that the alternatives. Senior members of the judiciary are understood to have intervened behind the scenes on its behalf. Without RMJ there is likely to be more injustice and suffering for vulnerable refugees and asylum seekers. There is no reasoned case for refusing the help it needs to survive. But all this has fallen on deaf ears.

This sends a crude and simple message: “ We are the masters now, and we don’t care.” We got used to that kind of thing in the Thatcher years. Is this a sign of more to come?

 
 

Grandmentors is an eye-catching ‘big society’ idea, but its funding looks fragile

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It was difficult to miss the launch yesterday of Grandmentors. The 3-year pilot project aims to match what the press release from CSV calls “troubled teenagers” from deprived parts of London with grandparent-style volunteer mentors.

Grandmentors cropped up on the Today programme, in the Daily Telegraph – ‘granny knows best’ – and in The Times – highly unusual for a tiny test-bed volunteering scheme of 60 placements. But it’s not difficult to see why the media was interested: Grandmentors is a simple, practical idea that’s easy to understand. It’s significant because it’s the first concrete example of the ‘big society’ in action for all those confused voters on doorsteps. Grandmentors is the abstract made real.

But there’s a catch: the project is funded solely by the JECDA Foundation, the family charity of Conservative peer Lord Freud, with a one-off donation of £200,000. When that runs out, fresh funding must be found to keep it going.

Could Grandmentors’ fragile funding be a predictor of that of other ‘big society’ projects? It looks possible, and it’s cause for concern.

Can Gift Aid reform break out of this Sisyphean state?

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When I was at school, an enthusiastic teacher decided to educate us in the Greek myths. One was the story of Sisyphus, who irritated Zeus, the king of the gods, and was condemned in return to push a rock up a hill for all eternity. Once the rock got to the top, it would always roll down the other side, and off he went again.

This piece of classical trivia has given rise to one of my favourite words, Sisyphean, describing a long and continuous labour with no obvious end in sight. It’s a word that could be used to describe Gift Aid reform, a process which has been going on in one form or another ever since this tax relief was first granted, and appears no closer to its conclusion.

The new government has said it will present a general plan for reform in September, and has pledged to “make an announcement about Gift Aid in the next Budget” – although it’s vague on what that announcement will be.

It’s doubtful that this will be an end to the process, but there may be some progress. However, none of the more radical proposals suggested last year – such as opt-out, accounts-based or higher rate relief for charities – look like they will be considered.

The sector seemed to be moving in favour of a composite rate – a single rate of Gift Aid for all donations below £10,000, with a corresponding loss of relief for higher-rate taxpayers but with an exemption for big donors who really care about their tax relief. It doesn’t look likely that this will happen, either. The Treasury is worried about its cost; HMRC is worried about the potential for fraud, and in any case both departments have bigger fish to fry.

What we’re likely to get is a promise to streamline the system, which may be a better deal for the sector as there are some real victories to be won here.

First and foremost is a promise to allow charities to file and store Gift Aid claims online. Second is a donor database, which would allow donors to confirm that they agree to Gift Aid on all donations they make to any charity in the future. Unsurprisingly, however, HMRC has shown little enthusiasm for keeping such a database.

There are other possibilities, too, but there is also one certainty: there is a still a long way to go.

Small charities and staff pension schemes do not mix

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Small charities and staff pension schemes do not seem to go well together. Too often, when combined, they lead to disaster, particularly for the trustees.

A good example of this is Hirwaun YMCA, a small charity which, many years ago, hired two people without realising it was opening itself up to a large future pensions deficit. When the last member of staff left, the charity’s liability crystallised and it was required to pay off its debt immediately.

Hirwaun said it couldn’t afford to pay, and as a result the chair of the trustees has been sued personally for the money.

Hirwaun is by no means the only unincorporated charity to face closure because of a large and unexpected pensions bill for which the trustees are personally liable. And it is not the only charity where the pension plan trustee is considering suing trustees to get its money back.

In a way, the chair of Hirwaun is lucky. He can sell his charity’s building, close the YMCA down, and pay the debts. Others may not have the luxury of valuable fixed assets to help them out.

The problem is potentially widespread. Small charities up and down the land have signed up to unsuitable pension plans which they will find difficult to get out of, and will leave them with enormous bills when the last employee leaves. Incredibly, small charities are still signing up today to highly risky defined benefit pension plans, while at the same time large corporations are desperately shutting theirs down.

Why do trustees get themselves in these situations? Often because they don’t know what they are signing up for. It takes a lot of work and plenty of technical knowledge to find out your potential worst-case pensions liability, and anyone without a background in finance stands little chance.

Volunteers should not have to take on such risks. But they do, often without realising. And there is little by way of a safety net to help them.

Baroness Smith of Pitsea?

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There was the usual fighting talk when Angela Smith lost her seat at South Basildon and East Thurrock at the election: the seat’s only on loan to you Tories, we’ll be back, and so on.

It may well be that Labour will regain this marginal constituency when the pendulum swings again, but it won’t be in the person of Smith, whose elevation to the Lords was announced in the dissolution honours list. Baroness Smith of Pitsea?

She will be joining a cohort that probably has more extensive knowledge and experience of the sector than their counterparts in the Commons. Think of Lord Phillips, Baroness Pitkeathley, Baroness Barker and more. It will be to the sector’s advantage to have not one but two former ministers joining this outfit – Paul Boateng, who was responsible for the sector before the Office of the Third Sector was created, is also ennobled.

But it will be interesting to see how Smith’s interests play out in the upper chamber. She’s often made it clear that animal rights are a major concern for her: she worked for the League Against Cruel Sports before she went into Parliament in 1997 and she is a patron of the Captive Animals Protection Society.

Given the relative freedom of the red benches, perhaps she’ll focus more on her cause area than the generic concerns of the sector itself.

P.S. It’s reported in the Guardian diary column (so it must be correct) that Smith is arguing that it’s time for the ermine on their lordships’ robes to be fake fur instead of real. Might this be a sign of things to come?

The time is right for charities to shock again

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The headline finding for the voluntary sector in the latest annual report of the Advertising Standards Authority is that the number of complaints about non-commercial organisations more than doubled last year.

The figure had already increased by 150 per cent in 2008, from its 2007 level.

But this year’s list of the top 10 most-complained-about ads contains only one charity entry: the deliberately-provocative bus adverts by the British Humanist Association, which carried the slogan “There’s probably no God”. 

The doubling of the figure was probably due to complaints about non-commercial groups that are not charities, such as the Christian Party’s adverts that mimicked the atheist bus campaign but read “There definitely is a God”, which was the most-complained-about advert of the year.

Children’s charity Barnardo’s, whose ads showing newborn babies with cockroaches coming out of their mouths and children being hit have featured prominently in previous ASA lists, was nowhere to be seen. Neither was the British Heart Foundation, whose image of a woman with a plastic bag over her head was eventually banned, nor animal rights charity Peta, which equated feeding children meat to child abuse.

So, what’s happened to charities? Have they abandoned shock tactics because they’re becoming less effective?

Or are they erring on the side of caution because money is so tight at the moment, especially in many charities’ marketing and communications departments? Spending large sums on an advert that is later banned might be difficult to justify to a board of trustees.

I hope the recession hasn’t made charities more cautious and timid in this way. The sector’s riskier campaigns, when executed well, are lively and challenging and get people talking. They set charity adverts apart from those that are pushing products.

And now, more than ever, charities could get away with being controversial. The public would understand, if they were prompted to do so, that charities and their beneficiaries are having a particularly tough time in the recession.

I think it’s time for the sector to produce a few more Barnardo’s-style shockers.

 

The strange cross-party allure of Citizens UK

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In recent months one of the lesser known charities in the nation has exerted a remarkable influence over politicians across the partisan divide. During the election campaign, aside from the BBC, ITV and Sky, only one organisation could persuade the three party leaders to come together and debate with each other – the civic activism charity Citizens UK.

In this or any of its other guises – London Citizens and the Citizen Organising Foundation  – the group is far from a household name. But the Con-Lib coalition government wants to replicate its model of working by training 5,000 community organisers across the country as the part of the ‘big society’ programme.

Labour is equally enamoured. Its manifesto promised a clampdown on interest rates charged by payday lenders, mirroring one of London Citizens’ campaigns. James Purnell resigned as work and pension secretary last year to train as a community organiser, while leadership contender Ed Miliband has said he wants the Labour party to become “more like London Citizens”.

In part, the interest in Citizens UK stems from the parties’ need to find some intellectual ballast in an age of political vacuity. The charity has a well-developed philosophy of community organising, based on the thinking of American activist Saul Alinsky, which seeks to bring together faith groups, schools and trade unions to unify civil society and make demands on government and the private sector.

But its strange allure across the political spectrum – it must be the only organisation in Britain to boast Iain Duncan Smith and socialist film director Ken Loach as supporters – merits explanation. For the parties, the source of the attraction is different. For Labour, London Citizens’ underdog campaigns for underpaid cleaners and immigrants represents a way of reconnecting with its roots as well as involving a more democratic, grassroots way of doing politics than New Labour “command and control”.

For the Conservatives, London Citizens and Citizens UK’s campaigns – for the living wage or to grant citizenship to illegal immigrants – don’t appear to make a natural fit. But aside from its political campaigns, the group also seeks to make communities more self-reliant, to solve their own problems rather than looking to the state for help, or, as its own mission statement puts it, “re-weaving the fabric of civil society”. According to London Citizens’ lead organiser Neil Jameson, one of its responsibilities is to make the streets safer. This is quite compatible with the Tories’ “small state, big society” rhetoric.

This is why the government is so interested in training the “neighbourhood army” of community organisers. It also indicates, as far as the big society is concerned, that the Tories’ eyes are probably more directed to the local, community level than they are to the large, service providing charities.