Tuesday, 24 November 2020

Taxpayer funded charity: A review of the Centre for Welsh Studies' report

This month the Centre for Welsh Studies published a report on taxpayer funding of charities in Wales. I think this is a relevant topic to discuss, and as I am currently standing for the role of Policy Officer for Public Affairs Cymru it was of particular interest to me at this moment in time. I have to say there are passages within the report which read with a cynical perspective might suggest are designed more to trigger an argument than really assess the subject matter, but politics does not lack for cynicism at the moment and I would rather not add to it, so I shall address the report at face value.

Let us start with the principle that the report is seeking to reform. This is the idea that the state funds charities to lobby the state on policy. I can see the problem with such an arrangement. However, this report comes up short when it comes to understanding the nature of the funding it references. Indeed, from the methodology it appears that the basis of the report is the total amount of funding transferred between government and the identified charities rather than assessing the breakdown and constraints placed upon such funding.

When you or I donate to a charity that funding goes into a pot of non-restricted funds. In effect, it can be spent on anything the charity wishes subject to any criteria they explain at the point of donation. When a government provides funding to a charity it will typically be on a very strictly restricted funds basis. This can be spent only on one particular project. Furthermore, this project is often direct provision of a service for which the charity will have had to go through a competitive tendering process. Government chooses to outsource the work because the charities have the expertise to deliver the service at a cost which represents good value for the taxpayer. 

I do not imagine it is the position of the Centre for Welsh Studies that the services provide by charities after an open tendering process should instead be provided by an enlarged government without any form of competitive bidding process. That said it is surprising to see the self-declared "free market think tank" advocating funding remaining within the public sector via transfers from Welsh to local government rather than Welsh government to the charitable sector.

Had the author of the report sought to supplement the raw financial data with a series of interviews with those involved in the process of administering charity funding it would have become apparent that there is a lack of depth to the findings as the report currently stands. The lack of this rigor in the conclusion is disappointing because it makes it impossible to draw out meaningful conclusions.

The author is correct to state that "we cannot have a charity sector too afraid of critiquing the Government for fear for losing funding and being left dry". However, he fails to offer any evidence that this situation exists. Once again, interviews with policy officers of charities might have generated an evidence base but such a conclusion does not stand up to scrutiny based on high level financial research alone.

There are peculiarities in the report. At one point it seems as though there is less objection to funding for charities the Centre for Welsh Studies approves of. The reference to ASH Cymru receiving funding while smoking is legal neglects the fact that the charity are seeking step change to end smoking which is in keeping with the policy of Welsh Government. Perhaps the shortcomings of the report are most clearly summed up in the sentence "we don’t have that information so we can rightly state that the figure must be enormous".

Welsh democracy is a relative youngster compare to many parliamentary systems which have the same relationship between government and the charity sector. A sudden change in approach would hurt the vulnerable people supported by charities. Instead, what is required is funding transparency. The Centre for Welsh Studies is correct to refer to state support as taxpayer funding and the public have the right to see how their money is spent. If service provision by the charity sector is delivering value for money then there is no reason why it should cease.

If there are examples of the government funding charities to lobby the government then that does not appear to offer a good value proposition to the taxpayer. However, this report does not answer whether that is the case, let alone quantify the sum involved if it is occurring.

It is in everyone's interest to have a sustainable charitable sector that is not unduly reliant on state funding. At the same time, if charities are providing required services for the state it is only reasonable that they should be reimbursed appropriately. The Centre for Welsh Studies has asked an important question about state-funded lobbying, but unfortunately their report has moved us no closer to answering it.