Why was the chancellor so reluctant to bail out charities?

Earlier this week, the chancellor handed out £750m to the voluntary sector – a fraction of the £4bn charities said they needed to get through three months of lockdown. It’s a decision high makes no economic sense – so why did it happen, and what does it mean for charities?

Last week, the chancellor of the exchequer laid down a rescue package for charities: £750m, divided into smaller pots for specific parts of the sector. The majority of charities will get nothing.

It’s hard not to see this as a dismissal, really.

The charity sector is in crisis. Services are closing every day. Need is spiralling. We asked for £4bn, just to cover the next twelve weeks. We probably needed more. And three weeks into the crisis, grudgingly, we got a fraction of that. It look some amazing lobbying work from NCVO and others to get even that.

The crazy thing is that government is perfectly happy to give charities money, but only if they promise not to help people. So long as staff are sent home on furlough, government will pay their wages.

So charities are left in an invidious position. Send the staff home, help no one, and remain in business. Or carry on meeting the need, get nothing, and risk going under.

Government doesn’t need to spend a penny to help charities. It just needs to say that if you have a charity number, government will underwrite you if you carry on working, as well as if you stop. There would obviously need to be a bit of work to ensure government didn’t end up meeting the sector’s whole wage bill, but it wouldn’t be hard to manage.

It seems obvious that the refusal to do this is a poor decision in both social and economic terms. If charities don’t help vulnerable members of our society, government will end up footing the bill. Either government departments and local authorities will have to pay to do the work themselves, or they will have to pay more to deal with the consequences. And it will have to do it with less experienced people, because the experts are being paid to sit at home.

Fundamentally, those at the heart of government just don’t get this. Chancellor Rishi Sunak’s comments were full of talk about the gentleness of charity and the importance of small acts. Whoever wrote that, they obviously don’t believe charities are delivering much of serious value.

I have to ask why.

Worldview

I think the first problem is worldview and ideology.

Danny Kruger, a former charity chief executive and now a Conservative MP, summarised the problem in a blog for Conservative Home, when he described the dominant Tory ideology as “a sort of reductive Thatcherism” in which the individual was sovereign, the shareholder was king, and the idea of community was irrelevant to politics.

In contrast, charities are very left wing institutions. By our nature, we believe in large scale redistribution of resources to protect vulnerable people. There’s a general feeling that the state should act to protect people, and that communities should be central to government strategy – that the things that matter most are not captured in GDP.

Charities’ attitudes are left wing enough that during the last Labour government, we were accused by right wingers of being established by the state as “sock puppets” to espouse unpopular opinions that the government wanted to implement.

What this means is that while charities are required to be non-party political, we are not politically neutral, and Conservative MPs are more than capable of spotting this. There is a reasonable degree of acceptance that charities are valuable service providers, but for the most part, the Tory view of charity work seems to be that it should be small scale, local, and nice, and that the serious stuff should be left to the grown-ups.

Attitudes at the Treasury

Nor is scepticism of charities necessarily limited to politicians. Asheem Singh, director of economy at the RSA and former head of policy at Acevo, got in touch with me to say he felt the problem was at least as much to do with officials at the Treasury.

These officials, he said, fundamentally did not trust charities as stewards of public funds. There were fears that any money handed over would be lost to misrepresentation or simply squandered by those whose need was not that great.

Another explanation is simply that the Treasury isn’t very interested in charities. To the bright 25-year-old officials with their 2:1 degrees in PPE, the value of the charitable activity isn’t going to be intuitively obvious. Charity just doesn’t show up well on the tools economists use to measure value.

And we may not be helping ourselves, either. The Treasury doesn’t have much time for people who show up with iffy data, and this doesn’t leave the sector in a great position.

NCVO have done great work on the UK Civil Society Almanac, but data collected by the Charity Commission is very poor quality. None of the data we have is vey helpfully constructed to predict what might happen, rather than track what has.

None of it measures charities’ value, either. There have been relatively limited attempts to honestly quantify the difference the sector makes. A very significant number of the impact measures we’ve ever produced have been marketing tools.

Then there’s the complexity of the sector. Charities don’t have one revenue model, and we don’t deliver similar services. We’re united by purpose, not activity. Some charities have seen little drop in income. Some have seen income all but disappear. Some have effectively lost the ability to deliver all services. Others have seen need skyrocket. Capturing all of that is all but impossible.

So when the time came to assess the financial impact of lockdown on charities – and what that impact might mean for the country – we didn’t have very good estimates. We had to do some emergency calculations with the scant information available. I didn’t trust the accuracy of those figures, so perhaps it’s unsurprising that the Treasury didn’t either.

This matters, because the Treasury hears a lot of sob stories. I remember sitting in a session with David Gauke, then a junior Treasury minister. In this particular session, he talked about how often people told him that putting cash into their services would save the government money in the long run.

“They call it invest to save,” he said. “I find that you see the investment a lot more often than the saving.”

In short, I don’t think Treasury believed a word they were told.

(EDIT: Another reason’s been suggested as to why this is such a big barrier, and it’s one I’m well familiar with from years of writing about charity tax relief. Government financial officials are obsessed with fraud. My experience of many government schemes which at first glance look as if they will be well designed, simple and easy to use, is that the moment ministers’ backs are turned, they are laden down with anti-fraud measures. It may well be for this reasons that very little of the government’s promised £330bn rescue scheme has gone out of the door.)

Five years of bad press

All of the scepticism about charities in Whitehall has doubtless been compounded by the previous five years of bad press, which the sector has done relatively little to refute. For most of the last five years, charities have said, when asked about the impact of negative stories, that they aren’t that worried, because there has been little impact on donations. (Of late, we’ve seen a couple of stronger responses from RNLI and Girlguiding UK. But up until then it was pretty pitiful.)

There may not have been much impact on donations, but I bet those stories have been impacting on Tory politicians. They’ve painted a picture of a flaky, unreliable sector, full of lefties, which is likely to squander the cash it’s given. A sector which is good for PR, but not for heavy lifting. Not a sector which is really answer to anything. Those stories have effectively given permission to people all across government to believe their own prejudices.

To an extent, the sector is the author of its own misfortune here. We’ve taken the criticism, and done little to rebut it. We’ve allowed others to tell our story, and even sometimes encouraged misperceptions abut charities because sometimes they’re good for raising cash. The focus has been exclusively on donors, and we’re paying for that now.

Scrutiny

All of this is compounded by the state of regulation and scrutiny.

As I’ve said above, there is little quantitative evidence to show the value charities deliver to the nation. There is not even great data on how the money comes in, and what it is spent on. And despite the fact that charities exist to deliver public benefit, there no scrutiny of whether we do so, beyond some de minimis assessment of whether the law is being followed. The amount of money spent on regulating and scrutinising charities is one sixth of that spent on the education sector, despite schools and charities having similar turnover.

Add to this the frankly rather odd behaviour of the chair of the regulator, Baroness Stowell, who has spent her tenure alienating charities by lecturing us on various perceived failings, and the generally uneven approach to scams and wrongdoing which the Charity Commission has often taken

So we’re left with a situation where there is little information gathered to give people in government and the wider public any sense of the scale and importance of charities in UK society. You start to see whether public officials will wonder whether we are any good. If they think of us at all.

In the end…

The result is that for all these reasons, we are little regarded in government. Even now, when we can offer help they desperately need, at probably no net cost to the exchequer, those holding the purse strings think so little of us that they cannot bring themselves to believe it, and they would rather pay our people to sit at home than allocate the necessary head space to think about it.

The only reason why a bailout happened at all is because of concerted lobbying, calls in the press, and pressure from across parliament. In the face of that, the Treasury was always going to have to write a cheque. But they wrote the smallest one they could get away with.

And that is where we are, I’m afraid.