Charity Sector Funding: Transparency

Stuart Andrew Excerpts

Wednesday 1st March 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay) for tabling this important debate on the transparency of charity sector funding.

The transparency of charity funding forms a central tenet in enhancing public trust in charities. I am delighted to have the opportunity to discuss this important issue and to highlight the regulatory framework in which charities operate. It is this framework that provides transparency about where a charity’s funding comes from and how it is spent.

I acknowledge, as other hon. Members have, the huge contribution that charities make to the lives of individuals and communities up and down our country. There are over 169,000 charities on the Charity Commission register. Those organisations operate in areas as diverse as education, religion, sport, health, the environment, heritage, and arts and culture. My background in the charity sector makes me proud of its contribution to our society. The vast majority of charities are small in scale, operate on modest incomes and are run by passionate volunteers who are committed to helping others in their local communities, as the hon. Member for Strangford (Jim Shannon) mentioned in relation to Northern Ireland.

The charity sector’s income comes from a wide range of sources, including public donations, trading activities and Government grants and contracts. Therefore, the scale of the sector’s finances necessitates strong, robust and independent regulation to ensure that funds are properly accounted for. In England and Wales, the role is carried out by the Charity Commission as the independent registrar and regulator. By ensuring that the sector is well regulated, the public can have trust and confidence that their generous donations are spent appropriately.

Members will know that the Charity Commission is an independent non-ministerial Government Department. It is answerable to the courts for its legal decisions and to Parliament for its work. The chair of the commission, Orlando Fraser, has spoken about his focus on charities’ legal compliance and their accountability to the public for the money that they receive.

The Charity Commission plays an important role in ensuring that charities act within charity law to further their charitable purposes. All registered charities with an income of more than £25,000 are required to submit annual returns and accounts, including a trustees annual report, containing information about finances and activities. That enables the public to understand where a charity’s income has come from and on which activities it has spent its funds. The register of charities gives assurance about and transparency over the more than £80 billion of annual income across those charities.

Public trust in charities remains higher than in most other parts of society, and that is a reflection of the value the public thinks that charities can bring. Charities are such an important part of society and I share the wish of my hon. Friend the Member for South Thanet for them to be proactively transparent in how they use their money.

Unfortunately, there are a small number of cases of deliberate abuse of charity or serious mismanagement that puts charitable assets or beneficiaries at risk. In these cases, the commission has broad powers to intervene, investigate and take appropriate and proportionate regulatory action, ensuring charitable resources are used properly for the purpose for which they were provided.

However, I would point out that the Charity Commission is a small regulator with limited capacity and funding. It must therefore prioritise its resources where they will have the greatest impact. If hon. Members have any concerns that charities are acting outside of their charitable purpose, they should absolutely raise them, as my hon. Friend has done, with the Charity Commission. The size and scope is obviously something hon. Members may wish to consider.

Funding other charities and non-charitable organisations can be an effective way to further a charity’s purpose. However, charities must only fund activities that further their charitable purposes, and trustees must ensure they take steps to protect their charity’s assets and reputation.

I am aware that Members have expressed concerns about the campaigning activities of certain charities. It is important to stress that non-party political campaigning can be a legitimate way for charities to spend their resources, so long as they act within charity law. The law is clear: to be a charity, an organisation must exist only for charitable purposes. A political purpose is not a charitable purpose and therefore any organisation that has political purposes cannot by any degree be a charity.

However, charities can engage in political activity that is actively intended to change or influence decisions taken by the Government where it helps deliver the purpose of the charity—for example, a health charity could engage in political activity for a change in a policy on a particular health issue if doing so furthered their purposes—but charities are prohibited from supporting political parties or politicians, and where they engage with political parties, charities must take a balanced approach. If concerns are raised about a charity’s campaigning or political activity, it is of course right that the Charity Commission assesses those concerns and determines whether regulatory action is required. To help trustees understand the rules, the commission recently published an accessible five-minute guide. The guide supports its long-standing and longer-form guidance on this subject, and it is known as CC9.

Fundraising is a key source of income for charities. As my hon. Friend the Member for South Thanet mentioned, the generosity of the public is evident in appeals such as the Disasters Emergency Committee’s Turkey-Syria earthquake appeal, which has already raised more than £100 million. Again, because of the scale of fundraising, a strong regulator is required to promote best practice and assess concerns. That is why, in 2016, following a cross-party fundraising review, the Fundraising Regulator was established as the independent regulator of charitable fundraising.

While a significant amount of the sector’s funding comes from donations, some charities receive Government grants and contracts to deliver important public services, such as healthcare and addiction services. However, it is important to note that nearly two thirds of charities do not receive any funding at all from the Government. To ensure that taxpayer money is well spent, Government grants must comply with the grants functional standard, which requires due diligence to be undertaken on all potential grant recipients before an award is made.

There are also strict rules preventing taxpayer money from being used on lobbying or political activity. Such funds must be used only for the purposes set out in the grant agreements. The Government are committed to their transparency agenda, and annual statistics for all grants distributed by the Government can be found on gov.uk. Members of the public can search for grants awarded to charities by downloading the latest grants tables and filtering by a charity’s registration number. However, I hear what my hon. Friend says about how easy or accessible that is, and I commit to looking at that to ensure we are getting it right.

I would also say that some campaigning done by charities has improved public policy—think of the Royal Society for the Prevention of Accidents, whose campaigning brought about legislation on the wearing of seatbelts—and no one would argue against that. What has changed in recent years is that debates have been polarised or divisive. My hon. Friend has raised a number of examples today, which I cannot comment on specifically right now, although I assure him I will look at them and write to him.

It is clear from today’s debate that we share the same ambition to ensure charities continue to be supported through effective regulation. As I have highlighted, there are a variety of ways in which charities can demonstrate transparency in their funding and compliance in their use of public funds. I have heard my hon. Friend’s concerns today, and I commit to raising them with the chair of the Charity Commission at our next meeting. In closing, let me once again thank my hon. Friend for securing this important debate and all in attendance for such a valuable discussion. I commit to coming back to him as soon as possible.

Question put and agreed to.