The Charity Commission faces a drastic budget cut over the next four years. What does this mean for the future of charity regulation in the UK?
The Spending Review gave the Charity Commission (the Commission) an unwelcome and early Christmas 'present' in the form of fairly savage cuts to its budget.
Government funding is set to fall from the current £30m (2010/11) to £21.7m (2014/15). This follows from smaller reductions in the Commission's budget in the preceding years: for 2006 to 2008, the budget was frozen, which equates to a cut of some 2.5% per annum in real terms, and for 2009 to 2011, the reduction in real terms was some 5% per annum.
Combined, this equates to a cumulative budget cut of nearly 50%, which will force the Commission to take some radical, if not drastic, action.
Staff and related costs amount to some 65% of the Charity Commission's total expenditure, while property, accommodation and office costs were a further 23% of expenditure. Clearly, any significant reduction in expenditure can only be achieved via a reduction in staff, which in turn would lead to a reduced need for office accommodation. The Commission estimates that it needs to reduce the full time equivalent (FTE) head count by 140 staff, compared to current staffing of some 420 FTEs.
Duties of the Commission
The Commission has a multitude of roles, which are specified by statute.
- It acts as a registrar – admitting and removing charities to/from the register, maintaining the public file and facilitating public access to that file.
- It provides guidance for charities, both generic (available from the website) and also specific for individual charities and trustees who contact it.
- It gives legal consents to charities, taking on a function which might otherwise be undertaken by the Courts.
- It investigates potential and actual misconduct.
The Commission does not charge for any of these activities, relying solely on public funding.
The enactment of the Charities Act 2006 increased the work of the Commission, a process which is still ongoing. For example, it needs to establish systems to facilitate the registration of charitable incorporated organisations.
The Public Consultation
The Charity Commission has responded to the budget cuts by undertaking a public consultation. The consultation will help assess which of its activities are of most value to the respondees, what the risks facing the sector are perceived to be and where the Commission should be focusing its resources.
It has been suggested that one method for the Commission to save money would be to reduce the range of its activities, rather than simply trying to do the same work within a smaller budget. This might be achieved by:
- reducing its statutory role
- reducing the guidance given to charities – particularly one-to-one guidance.
Any reduction in the statutory role would need legislation. However, the Charities Act 2006 is due to be reviewed in 2011 and a consolidating Act has been promised. This may provide opportunity to reduce the role of the Commission and, perhaps, eliminate some bureaucracy.
Another option would be for the Commission to charge charities. For example, Companies House charges all registered companies and also those accessing data. If the Commission levied similar charges on charities, income of some £3.5m could be expected to be generated from charities themselves, with a further £1m potentially available from the provision of data. Charges could also be levied for the provision of guidance, although this might act as a disincentive for charities and trustees to request guidance.
This is not an easy time for the Commission and in the coming months the board will need to make some hard decisions. To the extent that outdated bureaucracy is eliminated, change will be welcome. However, the role of the Commission has been developed over 400 years and there is a risk that an emasculated commission could lead to a loss of public confidence in the sector.
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