Public funding of charities – comments by the new Charity Commission chair

It is slightly worrying that in his first speech as chair of the Charity Commission, William Shawcross has questioned whether charities in receipt of public funds have become ‘junior partners in the welfare state’. He went on to ask if they might be better off relying on private philanthropy – a view that we know many people share, but which is out of step with current reality.

It’s early days for the new Chair, so we look forward to meeting and debating this further with him. But it may be worth reviewing NCVO’s position and looking at the data to give us some more food-for-thought:

• In the eyes of the law, a charity is a charity regardless of whether it receives Government grants or delivers public service contracts. We agree. Even when a charity delivers contracts, it does so in line with its charitable purposes and because it sees this activity as advantageous to its beneficiaries.
• Charities get funding from a wide range of sources, and three quarters of all voluntary organisations do not receive any income from statutory sources. Overall, funding from statutory sources accounts for 38% of the sector’s income (amounting to £13.9 billion).
• NCVO has always advised charities not to put their eggs all in one basket. While efforts to increase donations are very welcome, charities should be wary of over-reliance on any one source of income. As one charity chief exec has put it, it’s not in the interests of vulnerable people to be served by vulnerable organisations. Particularly as new opportunities such as social investment arise, there are even more compelling reasons for charities to diversify.
• We need to be mindful too that increasing private philanthropy is not a solution for all charities. Often, smaller charities or those serving unpopular causes find it harder to fundraise – yet we know that these charities can often play a vital role in our communities, particularly reaching out to the most disadvantaged and marginalised people. It is also the case, as our recent UK Giving survey indicated, that in tough economic times, fewer people may be in a position to give.
• Finally, while there are risks in taking on public service contracts, there are also opportunities that go far beyond securing more funding. Delivering a public service contract may enable a charity to reach a far wider number of beneficiaries, to work in a more integrated way with local agencies, or to re-design existing services to better meet the needs of their community.

So, while some people would support the Chair’s comments, it is important to keep considering the evidence and to have a mature discussion on these important issues.

For more myth-busting and misconceptions about charities, see Karl’s blog on The Seven Deadly Charity Myths.