Charities already operate in a challenging financial climate, and now Brexit is expected to leave a £200m funding gap. Yet they continue to fulfil vital roles in our society: delivering services, supporting volunteering, advocating to shape laws and policies, as well as strengthening community cohesion.
If the sustainability of charities is to be maintained the Committee believes it is essential that their vital contribution is recognised by the Government, by the regulator and by their beneficiaries. Charities too must be certain that their governance is strong enough to enable them to face a challenging future with confidence.
The Committee argues that charities need more support in terms of funding which recognises that their core costs must be met, and that grants, as distinct from loans or contracts, play a vital role. It also recommends practical measures to strengthen charity governance, including greater access to training opportunities.
Chairman of the House of Lords Select Committee on Charities, Baroness Pitkeathley, said:
“Charities are the lifeblood of society. They play a fundamental role in our civil life and do so despite facing a multitude of challenges. Yet for them to continue to flourish, it is clear that they must be supported and promoted.
“We found that charities lead the way with innovation, but that this is at risk of being stifled by the ‘contract culture’. And while advocacy is a sign of a healthy democracy, and is a central part of charities’ role, this role has been threatened by Government.
“We hope that charities will be encouraged by this report; that the Government will respect their role; and that in addition it will value the connections charities have with all sections of society, and encourage the vital scrutiny they provide.”
Key findings from the report
The Committee is concerned that the Government attempted to inhibit charities’ advocacy role and failed to consult the sector sufficiently on changes that could have a major impact on their activities. The Committee heard how charities “play a crucial role as a non-partisan watchdog of Government actions”, provide oversight, and represent the views of those less able to be heard on their own. The report calls on both the Government and the Charity Commission to engage more effectively with the charity sector in future and to ensure that regulations and guidance make clear that these are not intended to restrict charities’ vital campaigning and advocacy roles.
Smaller charities are innovative by their very nature, with the flexibility and capability to generate ideas and thereby improve outcomes in wholly new ways. However, the financial pressures they face risk limiting this innovation. The Committee recommends that public bodies recognise the importance of charities enabling innovation and therefore that commissioning arrangements should allow for this. This could be achieved through grants to test new ideas and by avoiding overly-prescriptive contractual stipulations.
Charities need additional support with digital innovation. This could be assisted by the introduction of trustees with digital expertise on their governing boards, and by infrastructure bodies coordinating digital training opportunities.
While the role of charities and the value of the work that they do is indisputable, the many challenges facing them raised serious concerns for the Committee. These included:
- Funding – Charities continue to face restrictions in public finance, barriers to social investment, and the rise of contracts which do not cover core administration costs. There are also significant concerns that the anticipated loss of funding when the UK leaves the European Union will impact on smaller charities the most, yet it is these that are already under the most significant funding pressures. Further funding problems include commissioning processes that are skewed against smaller charities, and overly-prescribed contracts which inhibit innovation.
- Charity Regulation – The Committee welcomed the Charity Commission’s efforts to improve the effectiveness of its regulatory functions. However, the Committee was most concerned over the reduction in funding from the Treasury for the Commission and by proposals to charge charities an annual registration fee. While recognising the pressures which have led the Charity Commission to consider charges, the Committee has grave concerns about the proposal. It insists that any such proposal must be properly evidenced and must set out how it will directly benefit charities.
- Governance and Transparency – Improving these in charities to ensure they operate effectively was a priority for many witnesses, but robust governance with a culture of scrutiny, support and challenge cannot be developed overnight. The Committee supports updating the voluntary Governance Code; greater access to trustee training; and longer term efforts to move towards more effective governance.
The report is embargoed until 00:01 on Sunday 26 March. Copies of the report will be available to the media under embargo on Friday 24 March.
To request an embargoed copy of the report, or bid for an interview with Baroness Pitkeathley, the Chairman of the Committee, please email firstname.lastname@example.org or call 020 7219 8550.