Why did the Fundraising Review not recommend statutory regulation?

As everyone digests the conclusions and recommendations of the Fundraising Review, after overwhelming positive comments from the majority of charities, there are – understandably and inevitably – questions coming our way about some of the decisions made by the Review.

One of the questions we have prepared for is: why didn’t Review go down the route of statutory regulation, given its conclusion that self-regulation has failed?

The case for statutory intervention has gained strength over the Summer, with many calling for the regulation of fundraising to be given some form of statutory footing.

Ideas have ranged from forcing all fundraising charities to become members of the Fundraising Standards Board and abide by the Code of Fundraising Practice, as suggested by an amendment to the Charities Bill discussed in the House of Lords, to giving the fundraising regulator a statutory underpinning as suggested during an evidence session with the Public Administration Select Committee.

What exactly is statutory regulation?

Statutory regulation refers to any regulation that is implemented by law. Although it is often used as a synonym for ’state regulation’, which involves the performance of regulatory activities directly by government bodies, statutory regulation does not necessarily mean government control.

Statutory regulation does however require some form of state intervention in the regulatory regime. For instance, an act of parliament can force the industry to form a self-regulatory body, and establish in law aspects such as what sectors should be represented in the entity and the ethical criteria to be observed by its members.

What are the advantages of statutory regulation?

The Review recognised the appeal of statutory regulation.

An immediate advantage of statutory regulation is the legal compulsion and enforceability it guarantees. This in turn leads to a number of strengths in particular:

  • universal coverage
  • the imposition and enforcement of stringent sanctions, since non-compliance would constitute a breach of law

Both of which allows more effective control over the behaviour of sector organisations.

What would statutory regulation mean?

The introduction of statutory regulation would however cause a number of difficulties in the case of fundraising.

One of the main drawbacks of statutory regulation is that it can be inflexible and unresponsive to change, two factors that risk having considerable impact on fundraising rules. One of the lessons that we have learnt over the last couple of months is that fundraising practice needs to adapt and innovate in response to changing circumstances, including the public’s expectations.

Another important point that was made to the Review is that there needs to be the buy-in and involvement of fundraisers in the development of the rules and standards, in order to ensure their workability and adherence to. Statutory regulation may result in greater burdens being imposed and thereby inspire lower levels of cooperation by the industry.

Why not hand over fundraising regulation to the Charity Commission?

Earlier this week, the Sun newspaper explicitly called for the Charity Commission to be handed over responsibility for regulating fundraising.

Sun editorial calling for statutory regulation of fundraising
Sun editorial calling for statutory regulation of fundraising – click for full size

Although at first it may seem like the most simple and obvious solution, it would cause a number of problems.

From the point of view of fundraisers, it would be problematic since the Charity Commission has expertise in charity law, not in fundraising issues (and the many laws that are involved such as direct marketing, data sharing, privacy, etc.).

From the point of view of charities, it would be unfair since the Charity Commission’s remit would be limited to charities only, and therefore leave other large fundraising organisations such as universities and NGOs unchecked.

Charities that in the past have opposed plans to introduce charging by the Charity Commission may also want to think carefully before calling for the Charity Commission to regulate fundraising. After all, if it takes on responsibility for fundraising the Charity Commission would rightly expect the payment of a fee (similar to the FRSB membership fee). But this would be an additional arrow in the Charity Commission’s bow for pushing for charging for regulation more widely.

Self-regulation continues to be the solution

As Lord Hodgson concluded as part of his review of the Charities Act:

…effective self-regulation is preferable to statutory regulation in this field. Self-regulation is more flexible, responsive, and cost effective than statutory regulation.

The Review also heard from the majority of those it consulted that self-regulation remains the most appropriate model for fundraising: 90% of the submissions indicated a preference to preserve self-regulation.

So the Review proposes maintaining self-regulation. However, in order to ensure greater effectiveness as well as reassurance to the public, the self-regulatory system needs to be strengthened. Hence the recommendation that the fundraising regulator should establish an effective relationship and work in close co-operation with the Charity Commission (for charities in England and Wales) or other relevant statutory regulator. The statutory regulators identified would act as an additional ‘back stop’ and take a greater role in fundraising issues.

Statutory regulation is still on the table

The Review is clear: this is the last chance for fundraising self-regulation to work. The prospect of statutory intervention, and the much more burdensome rules this is likely to entail, is very real.

It has been four years since Lord Hodgson called on fundraisers and their bodies to get their act together, and now we are suggesting further ways in which this can be done.

It would be very unfortunate if the sector weren’t able to rise up to the challenge and show its commitment to high ethical standards which safeguard public trust and confidence.

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Elizabeth Chamberlain Elizabeth is head of policy and public services at NCVO. She has been part of the policy team since 2008, as the expert on charity law and regulation. Her policy interests also include charity campaigning, the sector’s independence, transparency, and accountability.

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