When charities aren't charities

Nick Seddon
Journalist and author of Who Cares? [1]

IT USED TO BE A TRUTH universally acknowledged that a charity in need of money turned to the public for support. But that is no longer the case.

Many charities depend on the state. Two thirds of the biggest charities that deliver services rely on government contracts for more than 80% of their income, and this includes some of the biggest and most famous brands – NCH (88%), Leonard Cheshire (88%) and Turning Point (96%).

Arms of government?
What difference does it make if a charity’s money is coming from the government?

For a start, in 88% of cases government contracts don’t cover the full costs of the projects they’re supposed to fund, so charities end up having to move money from other projects to subsidise the government’s work. Also worrying is the way that charities suffer from so-called mission creep. As they become more dependent on government money, that they begin to follow the government’s agenda. According to a recent Charity Commission survey, 75% of service-providing charities feel under pressure to conform to their funders’ wishes.

"It's time to clear things up. Why not re-classify the charitable sector?"

The risk is that as charities come to look more like the statutory departments on which they depend for money, they jeopardise the very attributes of the sector – innovation, diversity and so on – which made them attractive partners for government in the first place.

Levelling the playing-field
While no one doubts that major charities do good work, there’s a difference between a big brand with thousands of staff taking millions of taxpayers’ pounds and a small community-based charity dependent on volunteers and donations. They currently compete on the same playing field, both for contracts and the goodwill of the public, yet a recent survey has found that one in five people would be less likely to donate to a charity on the payroll of the government.

It’s time to clear things up. Why not reclassify the sector to help charities choose the kind of body they want to be – and help donors choose what they support?

We could have three categories:

Charities receiving less than 30% of their income from the state would still benefit from full charitable status.
Those receiving 30% to 70% would be called “state-funded charities” and receive more modest benefits.
Those currently receiving over 70% of their income from the state would have to choose either to reduce their dependency on state funding or lose their charitable status.

Classification	Example Charities
Independent charities (receiving less than 30 per cent of their income from the state)	National Trust RNLI The Salvation Army
State-funded charities (receiving between 30 and 70 per cent of their income from the state)	Save the Children Oxfam Shelter
Statutory agencies (receiving 70 per cent or more of their income from the state)	Turning Point NCH National Family and Parenting Institute

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