William Shawcross, Chair of the Charity Commission, gave a speech to the Lord Mayor's Charity Leadership Programme.
My Lord Mayor, My Lords, Ladies and Gentlemen, good evening, I am delighted to be here and honoured to have been asked to speak as part of the Lord Mayor’s new series of lectures about charities and the city. I would like to start by congratulating the new Lord Mayor on her election to this prestigious office and on the theme she has chosen for her mayoralty - “the energy to transform lives”.
Those words demonstrate commitment to a historic tradition. The office of Lord Mayor has for centuries served as a bridge between the men and women who create wealth and drive our economy and the many Londoners who, down the ages, have found themselves excluded from that wealth.
A charity founded by one of the Lord Mayor’s predecessors in 1424, The Charity of Sir Richard Whittington, is still on the register today, providing alms-houses for older people.
And one of London’s best-known grant-making charities, the City Bridge Trust, run by the Corporation of the City of London, has an even longer pedigree, and each year makes grants worth £15 million pounds to good causes. These are just two examples of the very many charities managed and supported by the London Livery Companies, whose histories are steeped in philanthropy and social action.
The Mayoralty continues to play such an important part in the life of the city because it has adapted to changing needs and priorities. Like so many of our great institutions, its history has been one of continuity and change. Britain’s heritage is so rich precisely because it is alive. We take pride in our past and we nurture our traditions. But we do not stand still.
This principle applies also to charity, which, in the happy words of William Beveridge, the father of the welfare state, runs like a golden thread through the living tapestry of our national story. Charities have sustained the heart of our national life for centuries. They have created and maintained some of our most important educational, religious, public, and cultural institutions. And they continue to touch all of our lives, every day.
Charities were once the creations of our Christian inheritance. In medieval and early Tudor times, property was left to monasteries and other religious institutions to help the poor. We gave alms and did charity because our Christian consciences told us to. God was at the heart of giving. In the 19th century amongst Christian denominations, none were more active than the Evangelicals. Lord Shaftesbury maintained in 1884 that “most of the great philanthropic movements of the century have sprung from the Evangelicals.”
In the 130 years since then, British society has changed almost beyond recognition. And yet the growth of the state and the decline in Christian observance has not dented Britain’s charitable energy. Indeed Christian charities are still strong.
Perhaps the greatest changes were ushered in by the cataclysm whose centenary we are already marking - the First World War. AJP Taylor famously wrote that until August 1914, “a sensible, law abiding Englishman could pass through life and hardly notice the existence of the State beyond the post office and the policeman.” As a result of the war, he wrote, government power over people grew inexorably and “the history of the English State and of the English people merged for the first time.”
In 1945, five years of total war led to the Labour Party under Clement Attlee sweeping into power on the promise of creating a welfare state. My father was a proud member of Attlee’s cabinet and indeed Clem Attlee and his wife Vi were godparents to my sister and me. Wonderful godparents too!
Since 1945, many people have predicted that the welfare state would sweep away the giant evils of want and squalor and make charity redundant. At one extreme, charities were described as “ineffectual remnants of Victorianism, associated with fruitless pieties and middle-class busybodies”. Richard Crossman, Labour intellectual and minister of health in the 1960s, revealed that radicals on the left saw philanthropy as “an odious expression of social oligarchy and churchy bourgeois attitudes”. But this, happily, was not a universal view.
I have already quoted William Beveridge. In 1948, the year the NHS began, he said “the making of a good society depends not on the State but on citizens, acting individually or in free association with one another, acting on motives of various kinds - some selfish, others unselfish, some narrow and material, others inspired by love of man and love of God.”
And fortunately, despite the growth of the state, the role and strength of charities grew, especially when people realised that the ‘New Jerusalem’ promised in 1945 was still in a distant land. Since the war, charities have pioneered the hospice movement, galvanised public action to protect the environment, and saved countless lives through their work in medical research and international aid.
Over recent decades, charities have continued to adapt remarkably effectively to fundamental social change. In the 1960s a new wave of charities aimed at tackling new or continued social problems, such as homelessness, sprang into life. Many are household names today.
More recently, many predicted the economic downturn would do lasting structural damage to the charitable sector. It has undoubtedly put many charities under serious financial pressure. I don’t wish to downplay the potential impact of this. But the Commission has not seen a decline in new registrations. And the total income of registered charities has continued to rise. It now stands at over £61 billion a year.
We certainly have need of charity today. Many families in London and across the UK rely on charitable food banks to eat. Many children would go to school hungry were it not for charitable breakfast clubs, many of our older people rely on charities for companionship and material support. The Evening Standard has reported extensively on deprivation in London, as part of their Dispossessed campaign. A report that shocked me particularly, written by David Cohen, described the return of pauper’s graves, including children pauper’s graves, in London.
On another tragic matter - Yesterday the Commission issued a public notice, which encourages people wishing to help those affected by the horrendous disaster in the Philippines to give to charities experienced in responding to such situations.
We pointed people towards the Disasters Emergency Committee’s new appeal. As you may know, the DEC brings together a wide range of international relief and development charities. Together, these experienced charities can, I believe, made the most effective co-ordinated response to disasters such as that caused by typhoon Haiyan.
I welcome such coordinated efforts and believe that charities should collaborate more often in the interests of their beneficiaries.
Having said, that, it is heartening to know that charities continue to respond to social need with innovative, practical, workable solutions.
So charities’ resilience and flexibility have undoubtedly served us well. Had the model of charity remained fixed in the 19th century, charity would today be just another chapter in our nation’s history and not the continuing golden thread I described earlier.
Personally, however, I wonder whether this success is coming at a cost. Namely at the cost of public understanding and ultimately public trust in charity. My fear is that people’s idea of charity - an idea for which they have a great deal of affection - is increasingly at odds with the reality. We see evidence of this gap whenever debates about charities hit the headlines. We see it in the age old concerns about charities’ overhead costs and whether they’re too high; we saw it recently on executive pay. That debate continues. Some are unhappy that executive pay became an issue. Others thought it was important for the soul of charities. The National Council for Voluntary Organisations has rightly, in my view, set up a commission to develop guidance for trustees.
There is another rather unexpected factor which relates to public trust in charities. It is that many people, perhaps most, are unaware of how many of the organisations they come into contact with as part of their daily lives - scout groups, schools, art galleries, universities - are in fact charities.
I fear that there has been a successive blurring of boundaries between charities and other types of organisation - both public and private, which in the long run, risks undermining public trust in the very concept of charity.
So I would like to set out the characteristics that I think are at the heart of charity. Put another way, there are boundaries beyond which charities must not pass. Boundaries that, as a society, we must continue to patrol with vigilance.
We must not sacrifice charities’ distinctiveness at the altar of their continued success. We must always have a reasonable, plausible answer to the question ‘what is charity, and why does it deserve the privileges this society grants it?’
Charities’ distinctiveness is, in my view, built on four fundamental principles. The first is independence. It is absolutely crucial that charities remain independent from all interests other than those of their beneficiaries.
Trustees must never be swayed by the interests of their funders, the personal interests of their trustees or staff members or indeed political parties.
I think this principle is relatively well understood and implemented at the level of individual charities. I hope that the Commission has contributed to this understanding, perhaps especially in our new guidance on decision-making. It helps trustees maintain their charities’ independence by guiding them through the decision-making process, giving them the confidence to use their own judgment in the best interests of their beneficiaries. Helping them identify what undue outside influence might look and feel like. There is evidence to suggest that trustees are using our guidance to good effect. In 2011, we published research into the experiences of charities working as part of consortia with other charities and private companies. This found that charities were, on the whole, very conscious of the need to remain true to their mission and maintain independent decision-making.
But independence is not just about the decisions made in individual charities. It is also about the wider relationship between charities and other sectors.
As you know, charities as a group are not shy of speaking out when issues of concern to them arise. I note, for example, charities’ concerns about what they perceive as potentially stifling implications on their freedoms in the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Bill. It is not for the Commission as regulator to pass judgment on the rights or wrongs of legislation. But if the bill is enacted, we will need to make clear that being registered with the Electoral Commission as a third party does not mean a charity is engaging in party political activity, which charities must never do.
There are other concerns about the sector’s independence. In its most recent report, the Panel on the Independence of the Voluntary Sector concluded that “the very identity of the sector is in question as it is increasingly being treated as interchangeable with the public and private sectors. It pointed to the challenges that arise when voluntary organisations, which according to the National Council of Voluntary Organisations (NCVO), rely overall on the state for 38% of their income, are beholden to powerful government contractors. In 1980 only about 10% of charitable revenue came from government sources. That is a change of which we should be aware.
The Commission as regulator does not have a role in judging funding models. But the findings of the Independence Panel’s report worry me. Charities used to act as a buffer between citizens and the state and I think this is still an important role for them. Forgive me for quoting Beveridge again, but he was remarkable because, even while creating the welfare state, he worried about the State’s capacity, I quote, “to destroy the freedom and spirit of social conscience.” He was right and his insight remains really important.
I don’t think it is for the Commission to define what is the correct relationship between charities and the state - except to say that it must be open.
The future, in my view, is sitting in this room. You have the power to transform lives, as the Lord Mayor proposes. You are the future. As are your relatives, friends, neighbours and colleagues. The future lies in a resurgence of philanthropy, of giving to those most in need. Charities would be less reliant on government if they could source an even greater proportion of their income from private donations.
The British are already a generous people. According to a survey by NCVO and the Charities Aid Foundation, the public donated about £9bn to charities in 2011-12. Over half of all British adults gave to charity on a monthly basis. This is to be celebrated.
But the same survey shows that only 6% of people gave to charities helping older people. Only one in ten people give to charities supporting people with disabilities. Only 8% give to charities helping homeless people. Twice as many give to animal charities.
Now it’s not for the Commission as charity regulator to tell people how to give or how much to give. But it seems to me that we have become so used to looking to the state to solve serious social problems that we have become less ambitious about our charitable giving. Someone suggested that many of us choose charities haphazardly - asking ourselves “what kind of charity suits me?” rather than “who most needs my support?”. Indeed, the academic Beth Breeze says that her research shows that giving is often even more random than that. One generous donor told her that he always gave to charities that approached him on his birthday.
That’s a very good tip for fundraisers!
Such approaches to charitable giving may be fine during a time of plenty. But it’s clear that the state will come under increasing pressure as the population grows larger and older and expectations of the health service, of social care provision, increase. - and cannot be met.
Under these circumstances, I think we each need to give to charity as though our lives depended on it. As though the comfort of our own parents, the safety of our own children were at stake. I would like us each to consider the most pressing problems facing our communities and our society and to give accordingly. Not because I believe the state has no role to play. But because I believe that charities will need to play an ever increasing role in meeting the needs in society.
And not just in Britain. Governments all over the democratic world are having more and more difficulties in meeting the expectations of their citizens.
And so we return to Philanthropy. There is a hugely important tradition in Britain of individuals and families who set an example to others by using their money, influence and energy to make a very serious difference to people in need of their help.
Many such families are well known - think of the Sainsburys, the Rothschilds, Vivian Duffield, the Banfords, the Sacklers - there are many, many more.
Earlier this week, in this great house, I had the privilege of meeting Dame Stephanie Shirley, a superb business woman, who made a fortune out of her IT business and has given scores of millions of it away to charity. Interestingly she said that creating employment was just as important as being generous.
I was also heartened, earlier this week, to read that the total value of donations of over a million pounds has risen to its highest level since 2008. According to the Coutts Million Pound Donor report, such donations totalled over £1.3 billion in 2012. Most of were made by charitable foundations to other charitable causes. But a significant proportion, around 20%, came from wealthy individuals. I was surprised that only 7% of such large donations came from corporations. I am sure many could do better. I certainly welcome the Lord Mayor’s energetic ambition to revive a philanthropic spirit in the city. I wish her every success and hope the corporate sector meets her challenge.
The historian Frank Prochaska is always worth listening to on charitable issues. He wrote Royal Bounty which described the hugely important role of the monarchy in philanthropy. And his Christianity and Social Service is an excellent study of charity in the welfare age.
He said in a recent speech that it is entirely wrong to think of charity historically as the preserve of the rich. On the contrary, charitable activity within poor communities in the 19th century was extensive and he cited a London cleric who, around a hundred years ago, said that ‘the poor breathe an atmosphere of charity’ and that ‘it is largely this kindness of the poor to the poor which stands between our present civilization and revolution’.
More recently, in the 1950s, the Nathan Committee on law and charitable practice uncovered a rich seam of unpublicised philanthropy across the country that made ‘satisfactory social relationships possible.’
Incidentally, Frank Prochaska also spoke about the crucial role women have played in philanthropy - a heritage that the new Lord Mayor now builds on. He quoted the great Victorian philanthropist Josephine Butler to say that charity was essentially ‘feminine’, as it was linked to the tradition of Christian service that was behind so much nineteenth-century philanthropy, both male and female.
I mention all of this to remind ourselves that charity is in our culture. So calling for a new age of philanthropy is not just about asking those who are very rich to give more to prevent and alleviate poverty. It’s about reintroducing a culture of giving and caring, of mutual responsibility, to society more widely.
Above all, I believe and hope that we are on the cusp of a revolution in philanthropy. Sir Ronald Cohen, who is a great philanthropist and also a great student of all these problems, will be giving the next lecture in this series. He will speak about his work to nurture the nascent social investment market. He believes that social impact investment is the next revolution in philanthropy and one of the answers to the funding crisis facing charities. The term social investment covers a broad spectrum. In summary, the idea is to bring the worlds of finance and the market together with the voluntary sector to tackle entrenched social problems. Decision makers are taking a serious interest. They can see that Sir Ronald’s vision does really have the energy to transform lives.
As part of the UK’s presidency of the G8, an international taskforce on social investment, led by Sir Ronald, is now working to build interest and engagement among the key players, including industry, foundations and civil society. Again, I stress that it is not for the Charity Commission to champion one kind of giving over another. That is for people like Sir Ronald.
But the Commission has been working with partners in government interested in developing the social investment market. We want to remove, as far as possible, the barriers that may hinder charities from participating in these new initiatives - where charities decide it is right for them.
Our guidance on Charities and Investment makes clear that trustees can invest their funds in a way that furthers their aims as well as achieving some financial return. This guidance may itself encourage and develop the social investment market and I hope that this will, in a small way, contribute to a resurgence in philanthropy. Which in turn will help preserve the independence of the charity sector.
The second principle of charity is voluntarism; the principle that charity is the product of voluntary action by citizens who share a common social mission. Happily, the voluntary ethos is yet alive and well in Britain.
There are, officially, over a million charity volunteers in England and Wales, and 940,000 charity trustees, the vast majority of whom serve on a voluntary basis. These are extraordinary numbers but we know that levels of volunteering are in fact far higher. In surveys, over 70% of all people say they volunteer at least once a year. I suspect that even that figure fails to capture the full range of ways in which people give of their time to help others.
But you could argue that the voluntary principle is being weakened, for example by the argument that certain groups of charities should be free to pay their trustees a salary without permission from the Commission as regulator. This is tricky, particularly where trustees may be asked to give more of their time than they can really afford. Sometimes recompense may be needed. But I think those ultimately responsible for a charity should, except in rare circumstances, be free from financial interest in its work. Those making decisions about how a charity should pursue its mission and allocate its funds should be doing so because they care.
The Commission has just held the 4th annual Trustees’ Week, Its aim is to encourage people from all walks of life to consider trusteeship and to encourage charities to recruit widely to attract the best people. It focuses in particular on young people, who are underrepresented on boards despite having a great deal to contribute to charities.
In this year’s Trustees’ Week more than 40 events in England and Wales were held to promote and celebrate trusteeship, and the Commission organised a Parliamentary reception to bring MPs together with charity trustees in their constituencies. I met some remarkable young people and not one of them said they became a trustee because the money was good. Indeed, I doubt if any one of them was paid a bean.
I heard stories of people motivated by passion for the cause, a desire to serve their communities; by compassion for others. That should remain the case; the philanthropic instinct must remain at the heart of charity.
This is why the Commission is increasing transparency. In future, a charity’s entry on the online register will mark whether any of its trustees are paid. This new addition will add to the range of ways in which the Commission helps people make informed decisions about the charities they wish to support. The information on the online Register is a crucial resource for the public and one of my aims as Chairman of the Commission is to make it even easier to use.
The third principle of charity is public benefit. There has been much controversy in recent years about what public benefit means and how to judge whether a charity is providing public benefit. Since the 2006 Charity Act, the nature of public benefit, and the amount that an organisation has to provide to be a real charity under English law, has been fiercely debated.
I do not think we need to do that today. But I do think that we should remember that making a positive impact in the wider community remains at the heart of charity and should continue to be taken seriously. The concept is enshrined in law and has been clarified in recent court judgments.
The final principle of charity is probity, by which I mean, good, honest, accountable management. Charities are associated in the public mind with doing good and being good. Indeed, I am convinced that high levels of public trust in charities result as much from people’s confidence in the way charities are managed as in their support for the outcomes they achieve. The first responsibility for good governance lies with trustees. Trustees must enforce adequate systems of oversight and management and ensure their charities are transparent and accountable for the way in which they spend their money and help their beneficiaries.
But the Commission as regulator also plays a crucial role. In calling for a revolution in philanthropy, I am conscious of the Commission’s important duty to enhance public confidence in charities. To lay the foundations in terms of probity and good governance that give people the confidence and the faith to give of their time and their money to charity.
To do this we must prevent, and where necessary identify and tackle serious mismanagement and abuse in charities and I am determined to ensure we get better at doing so.
We must also take a critical look at ourselves at the Commission. We have, at times, been over cautious in dealing with serious problems in charities, especially where there is a suspicion of deliberate abuse. The Commission’s board and senior management team are in agreement that there is room for improvement. We are, indeed, already making changes. For example, we recently opened a class inquiry into charities that have failed to comply with their basic duties to file annual documents and accounts on at least two occasions over the past five years. This work will help ensure trustees’ compliance with their basic reporting duties. It will also help us identify further wrongdoing, as poor reporting behaviour can be associated with financial mismanagement and governance issues.
We are also using our legal powers more frequently and effectively. Last year, we exercised our compliance powers 216 times; in the first 6 months of this year alone, we have used them on over 350 occasions. And in October, we changed our policy on using information-gathering powers during statutory inquiries. We now always use our powers to require information from trustees for the purposes of the inquiry, rather than asking politely first. This new approach will speed up our investigations and help us identify trustees who refuse to co-operate with us at an earlier stage.
Finally, we are improving the way we report on compliance case work. We already publish reports after concluding a statutory inquiry into a charity. We have also developed a system of alerts to notify charities about risks we have identified in the course of our investigations.
But there is more we can do to inform the public. For instance, we now frequently issue press releases when a new inquiry has opened. I want the public to have better and more frequent access to examples of the impact we have. And I want to send regular deterrent messages to those who may be tempted to misuse charity for their own personal gain.
But we can only go so far. We as the regulator do not want to challenge the independence of charities, or put people off serving as trustees. Some of those who have criticised the Commission over its investigatory work seem to expect us to mistrust trustees as a matter of principle - assume we are usually being lied to by scheming, manipulative people.
That notion is abhorrent. I do not want the Commission to become a paranoid, Stasi-like regulator that suspects every one until they are proven innocent. We must remember that we are dealing, very largely, with committed unpaid volunteers. Almost half of all charities are tiny, kitchen-table operations with incomes of less than £10,000.
So while I fully accept many of the criticisms that have been made of the Commission, there are two points I am clear on: First - we must be very wary of placing an ever heavier regulatory burden on charities. We must remain proportionate. Second - we must continue to provide online guidance and support to charities. It has long been recognised that a charity regulator cannot be effective if it steps in only when problems have already occurred. We must help trustees do a good job in the first place. That includes providing excellent, user-friendly online guidance that helps busy trustees understand their duties and serve their charities well.
So those are my four principles of charity: independence, voluntarism, public benefit and probity. These are, to me, the foundation of what makes charity special.
But there are, of course, many other characteristics that contribute to a vibrant charitable sector.
When I spoke to my friend, James Jones, the former Bishop of Liverpool, who has extensive experience of the voluntary sector about this speech, he said I’d forgotten one of the most important characteristics of charity, namely creativity. He said that, in his experience, charities have a unique talent for responding to social need with initiative and creativity - he cited the emergence of food banks as an example of a creative, common sense response to the problem of hunger and poverty in many of our cities and rural communities. I wholeheartedly agree. Charities continue to be able to command such public respect not only because what they do is good, in the sense of moral. But also because so many charities are so good at furthering their objects and making a difference. That is why they have remained so important a part of our society over the generations, and why I believe they will continue to play a crucial role in addressing social need and bringing communities together.
I would like to leave you with a final thought. I started this evening by setting out my concerns about the blurring of boundaries between charities and other organisations, particularly government agencies. I will end by asking whether we really need to think more deeply about the boundaries between charities. I believe we should consider whether a single definition of charity can continue to accommodate so many wonderful, diverse models of non-governmental organisation.
The Commission’s online register of charities could play a role in describing the different models more clearly. Could it, for example, distinguish between organisations that are truly voluntary, that rely on public donations of time or money to support their work, and those which achieve their charitable purpose by delivering government services? Should it mark charities that receive a certain proportion of their funds from government? I don’t pretend to have a firm answer to these questions. But I do think we - by which I mean the charitable world in the widest sense - need to have the debate. And I think we should have it now, while public trust in charities is high.
Lord Mayor, you have chosen the theme of your mayoralty as “the energy to change lives” - and it is already clear that you are putting all your own energy into this vital cause.
What you are doing is very significant and I thank you for the honour of inviting me to make this speech. I wish you all success in this great office and this great endeavour. Thank you.