Session 2010-11
Publications on the internet

To be published as HC 716-i

House of COMMONS



Public Administration SELECT Committee

Funding of Voluntary Sector

Tuesday 18 January 2011

Thomas Hughes-Hallett and Sir Stuart Etherington

Evidence heard in Public Questions 1 - 116



This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.


The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Public Administration Select Committee

on Tuesday 18 January 2011

Members present:

Mr Bernard Jenkin (Chair)

Charlie Elphicke

Paul Flynn

Robert Halfon

David Heyes

Lindsay Roy

Mr Charles Walker


Examination of Witnesses

Witnesses: Thomas Hughes-Hallett, Chief Executive, Marie Curie Cancer Care, and Sir Stuart Etherington, Chief Executive, National Council for Voluntary Organisations, gave evidence.

Q1 Chair : I thank our witnesses for joining us this morning. We’re sorry you’re not going to be followed by the Minister today, but we will have the Minister to follow up this session on a future occasion. Could you just introduce yourselves for the record?

Sir Stuart Etherington: Thank you, Chair. I am Sir Stuart Etherington. I’m the Chief Executive of the National Council for Voluntary Organisations.

Thomas Hughes-Hallett: I am Thomas Hughes-Hallett. I’m Chief Executive of Marie Curie Cancer Care and also a trustee of the Esmée Fairbairn Foundation, which is a very significant charitable trust-it gives away about £25 million a year.

Q2 Chair : Thank you very much indeed.

I wonder if we could start with what prompted the Committee to move swiftly to this subject: the NCVO report produced at the end of last year called Funding the Future. It was produced by a funding commission that included Unity Trust, Capacitybuilders and the Joseph Rowntree Foundation. The report points out: "we are about to witness the biggest cuts in public expenditure and the most radical changes to public services, since the Second World War" and that the "outlook for voluntary funding is uncertain". The report presents two possible scenarios: first, that "the present pattern of public services is cut to the bone, serving fewer and fewer people. Commercial organisations take over the running of many of the services that are left". The alternative-rather rosier-scenario is that there is a "radical shift through which the present pattern of public services and models for delivery are altered through co-production with service users. A new social contract is developed". However, the report concludes: "we are currently in danger of heading for the first, rather than the second scenario." I wonder, Sir Stuart, whether you could say a bit more about that and tell us what reaction you’ve had to this report.

Sir Stuart Etherington: Yes. Generally, the reaction has been very positive. Perhaps I could outline why we came to commission this commission, as it were, and what we were trying to achieve.

The story of the funding of the voluntary sector-the charitable sector-over the past 10 to 15 years is a fairly simple one. The balance of funding has shifted from voluntary income to income from the state, and about 40% of the sector’s income now comes from public spending, principally from contracting to provide services in three main areas: health; social care; and education, employment and training. Those organisations that have a significant amount of public spending clearly are in some difficulties in the current environment, particularly given the pressure on local government spending, which is where quite a lot of charities are funded from. The report, I think, was an attempt to look, in the main, at non-statutory funding sources to see what possibility there was to diversify the funding base of the sector, and in particular to drive up philanthropy and social investment, which is seen as the third potential leg of funding.

Q3 Chair : Sorry, can you just explain a bit more about that? When you say "non-statutory funding", what do you mean?

Sir Stuart Etherington: There are three principal income streams that the sector has. One is money from the state, either in the form of grants or contracts.

Q4 Chair : And that’s what you mean by statutory funding?

Sir Stuart Etherington: That’s statutory funding, and increasingly that’s contract funding. The second element is philanthropy, and that’s in the broadest sense, so it might be legacies, individual donations, or money from direct mail or collections on the street-what the public think of as charitable donations of various kinds. The third leg of the sector’s income is what’s broadly been described as social investment-new financial instruments, social banking, loans, social impact bonds. There is a variety, but that’s a relatively small part of the sector’s income, although some people think it might be larger.

Q5 Chair : It’s what one might call social enterprise.

Sir Stuart Etherington: Yes, exactly. It’s the sort of social investment funding of social enterprise activity.

Q6 Chair : Would you put the foundation of mutual societies into that bracket?

Sir Stuart Etherington: Yes, I would, and their financing is very, very different from the charitable sector as a whole.

Q7 Chair: So it’s commercial in that it has to make ends meet, and it is market orientated in that it will generate its own income.

Sir Stuart Etherington: Yes.

Q8 Chair : But it will be for social purposes rather than for profit.

Sir Stuart Etherington: Absolutely right. It’s basically part of the wider civil society, which is, in a sense, more similar to the commercial sector, although it applies its services for social good.

Q9 Chair : So coming back to the reaction to your report, how do you think we’re going to get to the positive scenario rather than the negative one?

Sir Stuart Etherington: I think we have got to look at ways of driving up other sources of income other than the statutory income. That seems to me to be key to what’s going on. But also we have a major short-term problem, which is that the cuts are beginning to bite on the voluntary sector as a whole. There’s a gap issue, I think, here, which is that Government are keen to encourage philanthropy and keen to encourage social investment, but charities that have a significant amount of public money being paid for them to deliver services are feeling the cuts pretty quickly.

Q10 Chair : Mr Hughes-Hallett, is that your experience as well?

Thomas Hughes-Hallett: Very much so.

Q11 Chair : Could you give us some examples?

Thomas Hughes-Hallett: Certainly. Marie Curie has an income of approximately £130 million a year, of which £30 million comes from Government and £100 million from the public. We see the Government looking to charities to want to provide more services, but of course many of us in the voluntary sector provide services on not a full cost-recovery basis-what we’re about is supporting the most vulnerable. At a time when the Government are making their own cuts, as Sir Stuart rightly says, philanthropy itself is threatened. So the Government might be hoping that charities will come into this space, but they may not be able to. The only way, I think, in which we’re really going to be able to go into that space and support the most vulnerable in society, who are now having services removed from them, is if philanthropy is given encouragement and, if at all possible, the Government help that process with a lighter touch, not least from the Treasury.

Q12 Chair : We will come to giving later on in the conversation. I suppose the really big concern is that central Government-and indeed local government-when they have to cut the cloth, tend to cut the discretionary areas of funding to third-party organisations, rather than confront their own expenses on their own balance sheet and, particularly, reducing their own employees. Is that your experience?

Thomas Hughes-Hallett: Absolutely correct. Of course, the voluntary sector is a soft target in this respect. If we use the Marie Curie example, at the moment we’re talking to one of our very largest contract partners, where we provide about £500,000 of care in a particular county. Clearly we’re a very cheap provider, because we’re covering part of the cost. There are five charities providing end-of-life services in this particular county and we’ve now been told to bid blind to tell the state what the lowest contribution is we’re prepared to take from the state to allow our services to stay in the county. I think that’s close to greenmail, actually, but of course inevitably we’re the cheapest provider. Charities will always be a cheaper provider if they’re subsidising, and this is actually setting one charity off against another to drive prices down, so we’re in a very vulnerable position. We feel an obligation to the public in that county, who give us money, so we can’t possibly just walk away in the way that a private sector provider can, so it’s a very dangerous time for us.

Q13 Chair : Sir Stuart, what can be done to measure the performance of local authorities in this area? Maybe we could have a league table so that those who are cutting their charitable support the least and cutting their own overheads the most can be compared with those who are doing the reverse? Could the NCVO do some analysis on this?

Sir Stuart Etherington: Yes, we’ve done some. It’s fairly anecdotal, because this is happening in real time, but I think it’s important that the umbrella organisations-including NCVO plus the Office for Civil Society and the Department for Communities and Local Government-get a handle on what’s going on. There could be a clear recommendation that those Government Departments need to collaborate to get a picture of what is happening.

We have a lot of anecdotal evidence. For example, we’ve seen Nottinghamshire County Council announce its 58% budget cut to the voluntary sector, and Newcastle and Somerset similarly. Here is a classic example: Birmingham’s citizens advice bureau has had the majority of its funding cut from Birmingham City Council from 31 March and it’s been told that it can rebid for a contract on 1 June. There won’t be a CAB to bid for that contract on 1 June-it’s highly unlikely. So there are a lot of unintelligent cuts taking place. There are a lot of very fast cuts that are not seeing the joined-up nature of some of the things that are going on. I do think it’s important that we, together with the relevant Government Departments, get a handle on the scale of this. At the moment there’s no systematic research being done on the scale of local authority cuts.

Q14 Chair : That sounds like an embryo recommendation for us-

Sir Stuart Etherington: I would hope so, Chair.

Q15 Robert Halfon: You said that they were unintelligent cuts. What would you describe as intelligent cuts?

Sir Stuart Etherington: I think I would say that you have to think in a number of different ways about this. One is it is important not to cut services that have a demonstrable record in preventive services, because what you’re doing there is actually storing up more problems for the future. Early intervention has been demonstrated to work in a whole range of areas. If you cut those services, you’re likely to end up spending a damn sight more later on. So I think an unintelligent cut would be to cut-

Q16 Robert Halfon: No, what is an intelligent cut? What’s the alternative? What would you cut instead?

Sir Stuart Etherington: I think you could cut a number of areas where there’s no clear front-line impact, for example. There probably is a range of cuts in bureaucracies that can be made, particularly within the public sector locally.

Q17 Chair : It’s easy to say it, Sir Stuart, but difficult to identify.

Sir Stuart Etherington: Yes.

Q18 Robert Halfon: Can you give me an example? Give me an example of a cut that could take place instead in bureaucracy that would make a difference, meaning you therefore wouldn’t have to affect CABs.

Sir Stuart Etherington: I think there probably are a range of cuts that could be made within the public service, and I would like to see much more money being spent on front-line organisations, for example, that are demonstrably working with the most vulnerable groups.

Mr Walker: That means absolutely nothing.

Chair : You’re sounding like a Minister.

Q19 Mr Walker: You’ve come here and said that you want to see cuts made in public services. What cuts in the public sector do you want to see made that you think are intelligent cuts? You have to have some specifics.

Sir Stuart Etherington: With respect, I’ve not said that I want to see cuts. What I’m saying is that I don’t want to see cuts in front-line voluntary organisations that are dealing with the most vulnerable.

Q20 Mr Walker: We can’t have people coming here to give evidence and saying, "We believe there’s lots of waste in the public sector and that’s where the cuts should be." Where in the public sector? That’s what we want to know; where in the public sector do you think cuts should fall?

Sir Stuart Etherington: I’m not sure that I’m qualified to say that. I don’t work in the public sector.

Thomas Hughes-Hallett: I’ll try to give you an example. It is a well-known fact that approximately two thirds of the British population would like to die at home, with that home being either their own home or a care home. Only 25% achieve that. The vast majority of people die in hospital. All the economic evidence shows that it is far cheaper for people to die in the community, but there is a dramatic lack of 24/7 community services to support them. It’s quite clear that investment in community services, matched by cuts in hospital services for those patients, would be in the interest of patients, clinicians and the Treasury. That’s an example.

Q21 Mr Walker: That’s a very good example. Have you done anything with any organisation?

Thomas Hughes-Hallett: Yes. We’ve spent £7 million as a charity researching this across 20% of the British population. We’ve increased home deaths in Lincolnshire, for example, from 18% to 42%, and the consequence of that is the Government have now commissioned me to write an independent review of the funding of end-of-life care with the specific task of stimulating the growth of community services. So I think it can be done, but it’s difficult.

Q22 Robert Halfon: What is the response of the Government when you suggest this?

Thomas Hughes-Hallett: It’s quite an honest response, which is that it’s obvious that it’s cheaper to care for people in the community, but to fund that we’re going to have to make cuts in hospitals. You can’t actually just send people out into the community unless the services exist. A lot of those are provided by the voluntary sector, so that’s good news, as long as we retain our funding.

Q23 Chair : But as we move to GP commissioning, wouldn’t it be cheaper for GP commissioners to commission home help-home support for people in that situation-rather than to pay for hospital admissions? Won’t there be a natural drive under the new NHS arrangements?

Thomas Hughes-Hallett: Clearly so, and hence why I’m so concerned that, in this phase, the commissioners don’t cut grants to the voluntary sector because it’s easier to see the voluntary sector lay off staff than perhaps it is to make cuts in Government-employed staff.

Q24 Charlie Elphicke: I just wanted to get out there that here there seems to be a duality underpinning the work with the charitable sector at the moment. One the one hand you have county councils and suchlike doing commissioning of services. In that way, charity acts as a business like any other. I’m sure, Mr Hughes-Hallett, that when you were running your own bank and building your great fortune and success, you would try and keep the legal and the accountants’ fees down, like any other. Then there is the other side of charity work, which is what people consider they give fundraising for: the free services or free help that is given to people across civil society. I think there is an important duality here that on the one hand charities act as businesses like broadly any other-you’re a care home provider in that sense to a county council-and, on the other hand, services that are provided for the alleviation of poverty and suchlike are what the ordinary people in the street think that they are giving to help. Would you agree with that?

Thomas Hughes-Hallett: Totally. Indeed, I think the sector has allowed itself to become too dependent on Government funding. I think the sector has allowed itself to be seduced into thinking it should act more like a business. I don’t subscribe to that view. I subscribe passionately to the view that we have become over-dependent on Government funding. Some of the very largest charities are hardly charities any longer.

Q25 Mr Walker: Some of them are 85% public funded.

Thomas Hughes-Hallett: Absolutely. Is that really a charity or is that an arm of Government?

Q26 Robert Halfon : Do you agree with what Iain Duncan Smith has said? He’s called it the "Tescoisation" of the bigger charities-they’ve become so big that they’re indistinguishable from Government Departments. The Big Society really means supporting the charities at the lowest-

Thomas Hughes-Hallett: No, I think it’s a sweeping generalisation. I’m a great fan of Iain Duncan Smith and his work, but there are very large charities that are almost entirely dependent on Government funding, and there are very large charities that are almost entirely not dependent on Government funding. I worry desperately about this emphasis on small charities, because if you take health care and look at the contribution of Macmillan, Marie Curie, CRUK and the British Heart Foundation-just four organisations-between the four of us we commit up to £1 billion a year to support the health of the nation. So I think it’s very dangerous to ignore the role played by very large charities that are not dependent on Government funding.

Q27 Charlie Elphicke: I think you raise an absolutely perfect point. Those four charities you mentioned are what I would categorise as good charities-charities that make a real difference. My concern-I’ll put it to you and I’d be interested to know what you think-is about charities that are what you might call campaigning charities: Shelter doesn’t provide any shelter; and the NSPCC seems more into advertising campaigns these days than children’s homes, with Barnardo’s likewise. Is that a fair concern?

Thomas Hughes-Hallett: I don’t think it is for me to comment, but I leave it to the Chief Executive of the National Council for Voluntary Organisations.

Q28 Charlie Elphicke: Let me rephrase. Should there be more emphasis on charities providing-very much like what your own charity does-direct grassroots care and less on wider campaigning without that getting into the grassroots?

Robert Halfon: In essence, do some of the bigger charities spend too much on advertising, corporate campaigning and so on?

Chair : I think one question at a time, please.

Thomas Hughes-Hallett: Well, I’ll try to deal with essentially both those issues. It seems to me that it’s a pretty fundamental principle that free organisations and free associations can campaign-that’s important. I think there needs to be a balance between campaigning and service provision, and often charities will use their experience of providing services to influence public policy. They will say, "Look, we realise that caring for people with cancer requires a different approach, and we’re going to campaign to ensure that different approach." There wouldn’t be a hospice movement if there hadn’t been both the provision of hospices by the charitable sector and also arguments on the need for more of them. It’s a combination that often takes place. Different charities will make different decisions about the balance of that. I think the best charities combine the provision of direct services and the use of knowledge to influence policy. That’s the important principle I think.

Q29 Chair : Just in passing, Sir Stuart, you’ve had a letter from the NOtoAV campaign-

Sir Stuart Etherington: I have, yes.

Chair : -after a number of charitable logos appeared on the yes campaign website. A number of charities have responded and removed their logos, and I think all the logos have now been taken down. The Charity Commission has now issued guidance that referendums should be treated in the same way as party elections. Do you have a response that you could put on record about this?

Sir Stuart Etherington: Yes, we don’t take a view on AV. We won’t express a view on AV, and we think it’s unfortunate that an organisation that we were part of did that without informing any of us.

Q30 Chair: This is the organisation called Democracy Matters?

Sir Stuart Etherington: Correct, yes. We’ve asked for our logo to be taken down; we don’t take a view in relation to that. I think the important principle in relation to political campaigning is that organisations stick to their charitable objectives.

Q31 Chair: But Democracy Matters itself is not a charitable organisation is it?

Sir Stuart Etherington: No, it isn’t.

Q32 Chair: And it’s obviously a political campaigning organisation. Why are you associated with this organisation?

Sir Stuart Etherington: Well, it isn’t a political campaigning organisation.

Q33 Chair: Well, it obviously is.

Sir Stuart Etherington: It clearly indicated that it supports a particular line on AV. As soon as we found out, we asked for our logo to be removed.

Q34 Charlie Elphicke: Why are you a member?

Sir Stuart Etherington: It was about assisting organisations to develop their ability to campaign effectively, and we think intelligent campaigning is something that is part of the sector’s DNA.

Q35 Charlie Elphicke: Just to take you back a few moments, you said that free organisations should be able to campaign and broadly do what they like. I have to bring you up short on that. They may be free organisations, but not when they get the massive taxpayer subsidy. That subsidy-the taxfree status and the return of tax or Gift Aid or such like-applies because society takes a view that these organisations do things for the public benefit and are socially good. I put it to you again that that is better done by real action and actually helping people, rather than just running round advertising and talking about it.

Sir Stuart Etherington: I think good charities do both. I don’t think they can do anything in terms of campaigning; they have to act within the law-within charity law-and the pursuit of campaigning activity has to be directly related to their charitable objectives, and I support that completely. The Charity Commission issues very clear guidelines in relation to campaigning activity, and I would support charities that comply with those guidelines. It’s very important.

Q36 Chair: How did 23 charities get it wrong?

Sir Stuart Etherington: I think it’s not yet clear exactly what happened there, and I think we will clearly look in detail at that. But it was an organisation that was encouraging better and more effective campaigning. I don’t know why it issued its support for the AV campaign. As soon as we were aware of that, we indicated our displeasure with that.

Q37 Robert Halfon: Going back to charities and political campaigning, when you look at charities’ accounts on their websites, it is very difficult to see how much they’re spending on political campaigning, and yet you know they’re spending millions because they have public affairs officers and TV adverts, and they send leaflets through the post that are political. For example, I have had leaflets sent to my house by a charity called Christian Aid going on about Israel’s alleged treatment of the Palestinians, and I thought it was totally out of order for the charity to do that. Do you not agree that, to encourage giving, charities should be much more transparent and say exactly-in minute detail-what they spend their money on? Givers can then go on to their websites and say, "This charity is spending 20% of its budget on political campaigning. I don’t want to give my money to them; I’d rather give my money to the Marie Curie, which is doing a fantastic job with people suffering."

Sir Stuart Etherington: I agree, Mr Halfon. I think charities should be transparent in reporting what they spend on which particular activities. I do agree.

Q38 Robert Halfon: And does the NCVO or the Charities Foundation have any power to enforce guidelines, or is that up to the Government?

Sir Stuart Etherington: It’s up to the regulator. It is up to the Charity Commission to make sure its guidelines on campaigning are enforced. It’s political, but no charities should take party political stances-that’s quite clear.

Q39 Robert Halfon: That’s very different though. A party political stance is fairly easy to define, but to take the Israeli example I mentioned, you can have a view either way, but that was clearly political activity that had very little to do with fundraising and more to do with the political stance of that organisation.

Sir Stuart Etherington: I think charities should report what they’re spending on different types of activity, yes.

Thomas Hughes-Hallett: I was just going to say in response to Charlie Elphicke’s question that I have very real concerns about the level of spending on advertising by some of the largest charities, and every time I open a colour supplement or a newspaper and see a full page from a charity, it pains me greatly. I exploit it mercilessly by talking to potential donors about supporting Marie Curie rather than other charities, because the money that goes towards Rupert Murdoch’s empire could instead go towards providing care in the community. However, I think we have to accept that there has to be some advertising, but I am very conscious that a handful of very large charities are now spending so much money on advertising that there is a risk that other charities are dragged up. Barnardo’s and Marie Curie have talked about this a lot together in the context of other organisations that look after children and people with cancer.

Q40 Paul Flynn: Just following on from the point that Charles makes-one that I think we’re all conscious of-is the situation with an area of charity such as homelessness in which the problem has decreased to a quarter of what it was in the past 10 years or so. We used to see that the streets of London-areas around the Savoy Hotel-would be full of people who were sleeping overnight, and that’s gone. The number of people who are actually sleeping under the stars has gone down to a tiny level. The number of charities has increased in that time, however, as has the number of people working for them. Because they don’t have much work to do, they spend the money on advertising, which increases the perception that the problem is larger than it is, and when the problem disappears, charities don’t go off and work in areas that are necessary.

I think that Charles rightly makes the point that there’s a great deal of cynicism there. Who decides which charity is the worthy one? Is it done by clever advertising? There used to be a very expensive advert at Westminster station with a picture of the Chamber of the House of Commons-it was a Shelter advert. It is like the charities whose objects disappear continue. We had one quoted to us by the Charity Commission when it was clearing out the charity. There is one in Wales that exists to provide petticoats for fallen women. Now, there isn’t a great call for petticoats these days, and either there are no fallen women or perhaps everyone is a fallen woman-things have changed. But that charity exists, so it can only give money to that particular cause.

Chair: Can I press you to ask a question?

Paul Flynn: Indeed, yes. Sorry. Where can we be guided by what is the worthy charity? Is it determined by the amount of spending they do, which increases that false perception, or should, say, the Charity Commission, which has had a huge cut, be responsible for adjudicating when charities are overproviding in areas where the need has disappeared?

Thomas Hughes-Hallett: We’re one of the lower spenders per pound of size in advertising-we’re not great friends of the advertising industry-and our growth has been very significant. I don’t see a tremendous link. I think it’s slightly caveat donor, and I think that’s beginning to pay off. I think donors are getting tired of seeing full-page advertisements in newspapers day in, day out, from some very large charities when they’re not quite sure what they do. I’ve always taken the view that the public will catch you out eventually. There’s clearly still a misapprehension about what some charities do. Some people give significant sums to charities when they don’t really know what they do, but they associate with the brand name that’s been around for decades and decades, and at the end of the day philanthropy is not a very scientific business. Most of it is emotionally driven. I know that myself-it is emotion that mainly leads me to give.

Q41 Robert Halfon: It’s not just paper advertising; it’s TV advertising, which is constant all day, but particularly on daytime TV. Just going back to the political campaigning thing-to give you another example-Shelter regularly send press releases to my local newspaper with a particular stance about the coalition Government’s activities. Now you may disagree or agree on the coalition Government, but that is clearly political activity, and the local paper then prints that press release, and because it’s from a charity-Shelter-it’s regarded as the word of the gospel, and it’s very difficult for any politician of either side of the argument to argue against it. Surely the job of Shelter should be to provide homeless people with homes, not send out political press releases that are nakedly political in terminology and very difficult to argue against.

Sir Stuart Etherington: I think it’s the job of charities to do two things. One is to provide services for those in need, and I think that’s an important component in what they do. The other is to point out-I think in a non-partisan way-the potential detrimental effects of public policy decisions that impact on their constituency, and I think that is an important component of what they do.

Q42 Charlie Elphicke: Do you not regret that Shelter does not provide services-any services-to those in need?

Sir Stuart Etherington: It provides quite a lot of advice services, I think.

Charlie Elphicke: Advice?

Sir Stuart Etherington: Advice and information.

Q43 Charlie Elphicke: What about actually helping homeless people?

Sir Stuart Etherington: There are a variety of other homeless charities that do that, and I’m not familiar with the exact nature of the services that they provide.

Q44 Chair: Can I just finish off this subject-we’ve spent a lot of time on it and it wasn’t on our brief this morning, but nevertheless it’s very important? Who should be responsible for measuring whether charities are actually involved with charitable activities sufficiently, or are becoming over-involved with campaigning activities? Who should be responsible?

Sir Stuart Etherington: Ultimately the regulator. Ultimately the Charity Commission.

Q45 Chair: But is there a case for an organisation such as NCVO-a nongovernmental organisation-taking a guideline view and highlighting some of the worst offenders? Isn’t there a case for the charity sector to regulate itself?

Sir Stuart Etherington: I think it is a job for the regulator because it relates to charity law.

Q46 Chair: Isn’t there a danger for some charities? Marie Curie very courageously differentiates itself from some of its peer group. Isn’t there a case for charities themselves marketing more aggressively what they do and basically identifying a list of the worst offenders?

Sir Stuart Etherington: I think there’s a case for organisations in the charitable sector to assist charities in measuring the impact of what they do in terms of services, and over the past five years there has been increased activity in helping organisations to do that. New Philanthropy Capital, for example, does that.

Q47 Chair: But would you recommend that the regulator toughens up the rules?

Sir Stuart Etherington: I would recommend that the regulator enforces the rules effectively. Nothing in the rules-

Q48 Chair: So they’re not enforced effectively at the moment?

Sir Stuart Etherington: I think they are effectively enforced in relation to political campaigning, yes, but you would have to ask the regulator that.

Q49 Chair: But then you are saying that nothing will change?

Sir Stuart Etherington: I think that provided charities act within the law in relation to campaigning, they should have the right to do so.

Thomas Hughes-Hallett: But I think we have to be very careful about this, Chair, because there’s campaigning and campaigning, isn’t there? There’s waffle campaigning, if I may use that phrase, but last week this Government published its new cancer strategy, with £750 million of new money. All that money-every penny of it-has been aimed at survivors. There is not one penny for terminally ill patients. Would you rather that I, as Chief Executive of Marie Curie, which looks after 55% of cancer patients who die at home, don’t hold Lansley’s feet to the fire and say, "Hang on"? Would you describe that as political campaigning, or would you describe that as the job that I should be doing as Chief Executive of the charity representing the 600,000 people who are going to die this year?

Q50 Chair: So we need to be aware that we’re dealing with shades of grey here?

Thomas Hughes-Hallett: I think so. There’s political and then, frankly, there’s holding Government to account, irrespective of its political colour.

Charlie Elphicke: You can do that because you have the credibility to do that because you actually provide services. What we’re criticising here are charities who provide no services and just live off the fat of the land, and that’s just not acceptable.

Robert Halfon: My argument is that while I have no problem with what Shelter does, it should be classed as a pressure group, just as the TaxPayers Alliance is a pressure group.

Mr Walker: I just think that, perhaps, you might like to reflect on the fact that the charitable sector’s got itself in a little bit of a pickle over the last 10 or 15 years. Despite the impression I give to you, Sir Stuart, I’m quite mild mannered, but I am just so bored of being lobbied-not by Chief Executives of charities, who are now far too important to come and see mere humble Members of Parliament, but by parliamentary campaigns officers who, in most cases, have absolutely nothing of interest to tell me. They’re making work for themselves, ticking boxes, sending impersonal e-mails and sending letters on behalf of their Chief Executives with electronic signatures. I cannot recall ever sending a letter with an electronic signature to any of my constituents. I think that charities need to reflect on their own behaviour, and if they’re feeling under pressure from politicians, they should ask themselves why they’re coming under pressure from politicians. I think some of your members, as my colleagues have highlighted, are straying into dangerous waters at the moment.

Robert Halfon: And-

Chair: Mr Halfon, you’re beginning to try my patience, but carry on.

Q51 Robert Halfon: Not for the first time.

Given what Charles has just said, I would say that at least 20% of the 150 to 200 e-mails a day I get nowadays are from charities, and they’re not personal e-mails-they’re ones produced when people put their name and a postcode on their charity’s computer and you get an automated e-mail. Surely that is a very ineffective way of lobbying MPs?

Sir Stuart Etherington: I think it is bad campaigning.

Q52 Robert Halfon: But every charity group does it.

Thomas Hughes-Hallett: If you return to your file, you’ll find there’s a letter from me. Smudge it with your finger and you’ll find it smudges.

Q53 Chair: To move on, before we come to the question of giving, let us turn to the question of commissioning of public services. Isn’t there a danger of a conflict of interest developing in charities when they become too engaged with contracting for services to local authorities or to Government? Don’t they begin to be diverted from their charitable objects and just become a Government contractor?

Sir Stuart Etherington: The mix in different charities of the level of public funding is quite variable. Organisations that are highly dependent on public money have, I think, become so over a period of 10, 15 or 20 years as those contracts have been available. I think if they’re pursuing their charitable objectives in providing those services, they would see that as quite legitimate. I think there is a danger of over-dependency on public finances, and what we’re seeing now is, to a certain extent, the consequence of that.

Q54 Chair: Mr HughesHallett? You look troubled.

Thomas Hughes-Hallett: I think that is the $60,000 question that keeps me awake every night. The reality is, if you take Cornwall, there are no outofhours end of life services in Cornwall except for Marie Curie. Yes, we receive some funding from the Government to help to allow us to pursue those services. We’ve just been put on notice, actually, so it’ll be very interesting to see what’s going to happen in Cornwall now. Would I rather just be providing a free service in Cornwall? Yes, much. We could give access; we could be the gatekeeper. But the reality of life is that will be tearing up £30 million of funding for end-of-life care patients in Britain, and I’m not sure that’s in the interest of patients. I think it’s a nightmare conundrum, but the Government are clearly now encouraging charities to become one of the "any willing providers", and I think charities need to be very careful about being seduced into accepting that on the basis of full cost recovery.

Q55 Chair: My last question on this topic. Isn’t there a danger-it’s another danger that’s been highlighted by the Centre for Social Justice-that charities almost become nationalised by stealth, because they become subject to the targets the public sector puts on them, and so a good new charity that seems to have the initiative in a particular social sector finishes up just being a branch of local or central Government?

Thomas Hughes-Hallett: I think the trustees, as opposed to the executive, of charities need to be very alert to this and control their executive from rushing to bid for contracts on a willynilly basis.

Chair: So, moving on to giving.

Q56 Paul Flynn: How do we persuade rich people to give? I presume they don’t give because that’s the way they became rich in the first place. It does seem extraordinary that poor people are three times more likely to give to charity than rich people. Why is this?

Thomas Hughes-Hallett: This is my pet subject, so I’m very glad you’ve asked me. You may know, although perhaps you don’t, that I’ve recently launched an independent review into philanthropy in Britain with partly exactly this-but it is a big part-as the aim. I share your frustration. I’ve been extremely fortunate in life and I have chosen to try and make my children slightly nicer by giving as much as I possibly can away before I die. I think the answer to your question is complex, but I think there are some very simple things that can be done.

Q57 Chair: But is it true that rich people don’t give?

Thomas Hughes-Hallett: No, clearly not. There are some extraordinary generous people in this country, and indeed a very substantial part of the giving in this country comes from very few people. However, more worryingly, a very large number of people who could afford to give don’t. That’s a huge opportunity for us as a sector.

Q58 Chair: But our brief tells us that 8% of the population contributes 47% of total charitable contributions, though wealthy people tend to give a smaller proportion of their income.

Thomas Hughes-Hallett: I think that’s true as well. But I think there are some changes that we can make, and I think there are some that this House can help us with. It is very notable in the giving Green Paper that was published, interestingly, between Christmas and New Year-which was a pity for those of us in the sector; it would have been good to have it in mainstream time-there was no mention of any commitment from the Treasury in a review of giving. It seems quite extraordinary that a Green Paper should go out without any comment from within Government as to whether the Treasury is going to look at some advantages that might be made available for giving.

Let me give a very simple example: we are planning to do an event this summer that will raise a very substantial sum for end-of-life care nursing across Britain, and it’s going to be based on art. If you were to wish to donate from the House of Commons that fine picture to Marie Curie to help fund nursing-and you might take the view it’s been around there a long time and you’re quite bored of it, and rather than it sitting on the wall you might like it to be sold to fund Marie Curie nursing-before you could give it to me, as a British citizen, you will have to pay capital gains tax. So it’s on your wall and it’s not earning any money for anyone, including the Treasury, but if you wanted to give it to me, you will have to pay capital gains tax, so, guess what, you’re going to leave it on your wall and it will sit there for generations to come. So there are some very simple things that can be done around fiscal reform that I think would help enormously.

Q59 Chair: Does the same apply to shares?

Thomas Hughes-Hallett: No, so bizarrely you can give me shares and offset that against tax, but if you give me your house or your art, you can’t-in fact, you’re sort of taxed to do it. There are some idiosyncrasies that I think the Treasury needs to look at urgently.

Secondly, I think there’s a subject around recognition. One of the very most generous people in this country was honoured in the most recent honours list in the diplomatic section for services to AngloIsraeli relationships. This is a man1 who gives £7 million away a year, but he didn’t appear under philanthropy. We actually counted the number of people who appeared under philanthropy-there are almost none. Vernon Ellis received a knighthood partly for service to arts, but also he’s been an extraordinarily generous man. So I challenged the honours office and actually there isn’t a category for philanthropy.

Chair: How extraordinary. That’s astonishing.

Thomas Hughes-Hallett: You have to do philanthropy and service to local communities. So if you’re a very rich, very busy man and you write out a cheque for £50 million, that’s not enough-you’ve got to go and paint a bus shelter for 14 weeks as well as punishment. So I think there’s something around recognition that could be done.

Q60 Chair: Of course, it’s not been unknown for generosity to political parties to have an effect-

Thomas Hughes-Hallett: Chair, I leave you to say that.

Chair: In the past, of course.

Thomas Hughes-Hallett: I leave you to say that, and I’m not sure, as the Green Paper recommends, with great respect to Nick Hurd, that a letter from the Minister will quite do the trick. The suggestion in the Green Paper is that generous donors get letters from Ministers. So I think something around recognition.

I think that we ourselves, as an industry-if I may use that word on this particular occasion-really need to get our act together on working out how to ask people for more. I think we’re a bit shy. So, in answer to your question, I think there’s a bit about charities where we’re a bit shy about asking for large amounts from very busy people-it is quite scary, by the way-but, secondly, I think there’s a lot that can be done in terms of recognition and culture. That is the final point, which is longer term, around education and encouraging giving circles. We have all these high sheriffs dotted around the country. Why don’t high sheriffs call together giving circles in their counties or towns and talk about giving, without beastly fundraisers present asking them for money?

Q61 Chair: I think they do, don’t they?

Thomas Hughes-Hallett: Well, it doesn’t seem to have achieved very much.

Q62 Paul Flynn: The Government have come in with a large number of bright-or not so bright-ideas that they’re going to try to put in. We’ve seen a few failures recently. There was the Heyday introduced by Age Concern, where it lost £40 million on a very ambitious idea that collapsed. We’ve seen the way of collecting money in the streets by persuading people to sign up after pulling at the heartstrings with some story of a charity. People sign up, but now that those who were foolish enough to do this realise that their contributions for the first 18 months go to the person who persuaded them to sign anyway, and very little actually ends up with the charity, I think that’s been thoroughly discredited. We’re told that in America the successful system is through the tax system. That appears to work. I think we all have experienced that if it becomes known that someone is giving to charity, they become a soft touch and we become inundated with requests. Those who donate in the streets find that their names are sold to other charities. What is the best way in the future, having seen these failures, of increasing giving?

Thomas Hughes-Hallett: Can I make two comments and then pass over to Sir Stuart? I have a very strong view about Heyday, which is that it’s become fashionable to encourage charities to look at setting up social enterprises to make money. I’m afraid I’m a Luddite on this-I think it’s a disaster. I don’t think charities have the right management teams to run businesses; they have the right management teams to run charities.

Q63 Chair: What about Emmaus?

Thomas Hughes-Hallett: I can’t comment on that.

Chair: It does this very successfully. That is its charitable model.

Thomas Hughes-Hallett: But what business does it run?

Chair: It runs hostels for homeless people.

Thomas Hughes-Hallett: I think that’s different. I have been told of a hospice that’s just set up a brewery-that’s what I’m talking about. In terms of chugging, as it’s called, I must correct you on that, with respect. Not all charities that are doing onstreet collections give commission. Marie Curie collects on the streets widely. We pay none of those nice people who come up to you wearing a daffodil a penny of commission, and it’s an extremely efficient way of fundraising. It’s one of the ways of fundraising with the highest return on investment. The public doesn’t like it very much, and by the way, if you’ve been approached-with great respect to you and to me-it would mean that the person approaching you thinks you’re under 40, so you should be extremely flattered by it, because their target audience is 40 and under, and no one ever approaches me.

Q64 Paul Flynn: I’m pretty struck by what you said about the fact that Governments and society in general measure the effectiveness of help for those who are terminally ill by the number of weeks and days that they live, rather than measuring it by what we all want: a good death surrounded by our loved ones. Also, most people would regard having a choice of the time of death as being desirable too. By every measure of public opinion, most people would opt for euthanasia. How can we do something with the way the drugs are sold? It’s all about the time you survive, not the dignity of the death or the damage these drugs will do and so on, but that’s the only measure. Do you see it as a core activity of your charity to ensure that those attitudes, which most people feel, are reflected in Government policy?

Thomas Hughes-Hallett: I think there’s good news on that. I’m pleased to say it is not through expensive political campaigning-we have one junior policy officer, who is 30 and a very able young lady-but that commitment appeared in the manifestos of all three main English political parties.

Q65 Robert Halfon: I would like to ask two questions, please. First of all, I accept the recognition argument, which is incredibly important. The downside, of course, is that people will then say it is cash for OBEs-you give your £50 million, you get your OBE. I just wondered how you can answer that problem, before I come on to my second question.

Thomas Hughes-Hallett: Well, I think it is honours at every level; that's the answer.

Sir Stuart Etherington: It’s the point about public recognition. Unlike the United States, there doesn’t seem to be the same level of public recognition for people who give large gifts, and I think there should be. Whether you do it through the honours system or there is another way of doing it, I’m not sure, but I think we need to give that. Just covering the point about effective giving, clearly the most effective way of giving is giving regularly and using Gift Aid. The biggest change, I think, has been the introduction of Gift Aid, which was by a Conservative Government, and dropping the Gift Aid threshold under the last Government from £250 to zero, so any traceable donation by a taxpayer can now get Gift Aid relief. Many charities still don’t use Gift Aid, so I think they could use it more, and the system is quite cumbersome and is still paper-based. One of the things that we and Charities Aid Foundation have argued for is for the modernisation of the Gift Aid system, because that would make a big impact on charitable giving.

Q66 Lindsay Roy: Can you explain how exactly you would like to see this modernised and reformed?

Sir Stuart Etherington: Well, at the moment it’s a paper-based system, so the people go in, they fill out the piece of paper, it goes to HMRC, and the charity is reimbursed for the money. Much more could be done electronically, so that the charities could post the signed form-I think the person says, "I am a taxpayer and I want this to be treated as Gift Aid"-and the Revenue could do that automatically. Charities Aid Foundation has done a lot of work in relation to this, and I’m sure it would be happy to provide you with additional information about how it could be achieved.

Q67 Lindsay Roy: There’s no reference to this in the Green Paper. Have you made any representations on that basis?

Sir Stuart Etherington: Yes we have, and HMRC says that it can’t afford to do it, so there is a problem in relation to its ability to update its systems.

Q68 Lindsay Roy: Would the argument not be, in terms of our current position, that we can’t afford not to do it?

Sir Stuart Etherington: I think it should do it, and I think it should do it fairly quickly, but at the moment it is saying it can’t, and we’re still continuing the pressure on Government in relation to this.

Q69 Lindsay Roy: It does seem to be a major inhibitor to a key Government objective.

Sir Stuart Etherington: It is.

Q70 Chair: But couldn’t credit card companies be persuaded to store our national insurance number on our credit cards so that when we give through a credit card, the charity automatically gets our national insurance number and can extract the Gift Aid?

Sir Stuart Etherington: It’s an interesting idea. HMRC has to see it, though.

Q71 Chair: HMRC will see it when it sees the credit card transaction has taken place and your national insurance number-

Sir Stuart Etherington: That’s an interesting idea, Chair, yes.

Thomas Hughes-Hallett: One of the things we’re looking at in our review is that it is slightly odd that CAF is the only charitable bank account. Of course, I think I’m right in saying you can produce your CAF documentation for Gift Aid purposes.

Sir Stuart Etherington: Yes.

Thomas Hughes-Hallett: One of the things we’re likely to recommend is that the Government encourage all the major banks to set up charitable bank accounts for individuals that can then be used as evidence to HMRC of their charitable giving-first for tax reasons, but secondly because I believe firmly that if people have a charity bank account, they will actually spend it.

Q72 Robert Halfon: I went to a recent meeting where I was told that senior members of the American National Football League-the main players-all have their own individual charitable foundations, and you can’t say the same of very many footballers here. What is it about America that makes charitable giving so much higher and that makes rich people give so much more? Is it because they pay lower taxes, or are there other cultural reasons?

Sir Stuart Etherington: It’s a really difficult question to answer. There is a different tax regime in the United States, but also I think that expectations of the state are different: there might be a relationship between levels of charitable giving and your expectation of what you’re buying through your tax, as it were. There’s no empirical evidence for that, but it would seem to be a reasonably safe assumption that if you thought that you were actually paying for services through your tax bill, as it were, you might be less inclined to give to charities that are providing services as well. There’s no empirical evidence for that, as I say, but it seems to me to be reasonable to assume that that’s true.

Q73 Robert Halfon: What you’ve said is a profound philosophical point. You’re saying the smaller the state, the bigger the charitable giving.

Sir Stuart Etherington: It’s an interesting point. It might well be true, of course. I certainly think that the Big Society agenda is based in part on that assumption.

Thomas Hughes-Hallett: It’s worth remembering that although the Americans are held out as more generous than us, the great majority of that generosity goes towards their church and to their schools. They’re absolutely astonished that we give so much money to animals-they just can’t get it-but I think I’m right in saying that about 50% of their giving is either to church or to school, which actually does mean it’s absolutely in their culture, because from day one the children are used to the school they’re going to being funded by their parents and the church that they attend being funded by their parents.

Sir Stuart Etherington: And Tom makes a good point: another potential motivator for giving is, obviously, religion. There is actually a close correlation between religious belief and charitable giving and the giving of time, and as we’ve become more secular, that may well have had an impact on charitable giving.

Q74 Robert Halfon: Are Comic Relief and Red Nose Day-type days detrimental or positive in a sense? I don’t know how the charities are selected that people give to on those days, but does it take money away from lots of the other charities? I don’t know if Marie Curie’s ever been on Red Nose Day.

Thomas Hughes-Hallett: Well, it’s a very interesting question you ask. May I answer it? The Red Nose Day campaign happens smack in the middle of the Daffodil Campaign, and there’s something in me that doesn’t want to be mealymouthed but Marie Curie can’t benefit from Comic Relief, unfortunately, a) because of its criteria, and b) there’s something about all that coverage they get on a television channel that’s funded by taxpayers that Marie Curie would dearly love to have, too. So, yes, it does hurt us, there’s no question. It used to be every other year-now, with Sport Relief, it’s every year. Good for them. Actually, I think it’s a great organisation that supports all sorts of fantastic causes, but it’s pretty painful watching all that lovely free television time that I’m funding.

Q75 Robert Halfon: For all these special days, who decides which charities are going to be supported?

Sir Stuart Etherington: They have foundations attached to them, so Red Nose Day will provide information to the foundation. Both Children in Need and Red Nose Day-Comic Relief-have foundations. Those foundations have trustees, and they make decisions on how to dispense the money.

Q76 Robert Halfon: And do you lobby to be on Red Nose Day, or whatever it might be

Thomas Hughes-Hallett: I don’t think the public likes charities to be seen to be fighting among themselves, so it would have to be done very carefully, and not least as Comic Relief is a fantastic organisation.

Chair: That’s why political parties are so unpopular.

Thomas Hughes-Hallett: The simple answer to your question is I would love Comic Relief to make significant donations to Marie Curie, given the money that’s probably being taken away from us by its presence on TV.

Q77 Robert Halfon: A huge proportion of individuals’ money goes into these things because, as you said, of the huge coverage and the celebrity linkage, and it seems a very undemocratic way to decide how money is being given to charities. Shouldn’t there be a different way-a vote from the public, for example, on which charities should be supported on these special days?

Sir Stuart Etherington: I think that The Lottery has experimented with the public saying where they want the money to go to. There could, I suppose, be more engagement with the public to determine how money is allocated through these types of event. Comic Relief tends to give to smaller organisations that don’t have fundraising capacity themselves, so there is a sort of adjustment going on there. But I don’t see any reason why it shouldn’t take cognisance of public polling or some other way of identifying what the public thinks is particularly beneficial, given the fact that it has had very public fundraising from the media.

Chair: I’m aware that Mr Heyes hasn’t asked a question yet, so do chip in when you want to.

Q78 Charlie Elphicke: When I speak to people who are quite wealthy and the subject of giving and the impediments to giving come up, the same kind of themes often emerge: first, that a lot of charities have turned into massive bureaucracies that don’t actually help people, which we touched on earlier; and, secondly, the concern that there is almost a quangocracy of charities whereby charities have large bureaucracies of people who are highly paid. Some Chief Executives earn £120,000, and some even more, and people think, "Well, that’s not really volunteering; that’s like an industry and a business. Why should we give to that?" What is your reaction to that?

Sir Stuart Etherington: I think it depends on the nature of the charity. If you’re running a major service operation that’s actually providing very skilled care to very vulnerable people, as Tom is, for example, I don’t think you can underpay the executives. They’re often trying to do very skilful jobs. I think charities have to do the job of explaining exactly what they’re doing and exactly what they’re spending on what, and I think we would encourage charities to be transparent in saying what they’re spending on what and why they’re doing it.

Q79 Charlie Elphicke: Correct me if I’m wrong, but you’re the Chief Executive of the National Council for Voluntary Organisations, so don’t you think you should be taking the lead in encouraging more volunteering and encouraging more people to give voluntary time, rather than justifying why charity fat cats should have massive pay packets like they’re some kind of bankers?

Sir Stuart Etherington: I would encourage people to give up their time voluntarily, but I don’t think those two are mutually incompatible. If you’re running an organisation that is providing quite complex services, you do need to pay the executives of those organisations.

Q80 Charlie Elphicke: Take the case of your organisation. Is it not the case that you’ve recently made redundancies, yet you have six people who earn over £80,000 a year? Did any of those take pay cuts when those redundancies were made? Is everyone all in it together?

Sir Stuart Etherington: We’ve had a pay freeze now for three years.

Q81 Charlie Elphicke: Touching on the issue about encouraging more giving, it seems to me that a lot of people are concerned about the Charity Commission being a paper tiger. I haven’t heard anything today that provides leadership from you as to how charities can get their house in order and be more proactive about what they’re doing. Do you not think that you and the Charity Commission have a dual and joint role to improve practice in the industry?

Sir Stuart Etherington: The majority of the money that NCVO spends is actually spent on providing advice and information services to improve their performance, and that would be across a range of issues. We focus on good governance, the provision of information about funding opportunities, and looking at the recruitment and retention of volunteers. The bulk of our work is providing advice and information to organisations about how they can improve their performance, and that’s a very important function of NCVO.

Q82 Chair: So do you think you’ll achieve your 2020 target of increasing charitable giving to £20 billion a year?

Sir Stuart Etherington: I certainly hope so, and I think it is possible.

Q83 Chair: And do you think that can be done if taxation goes on rising?

Sir Stuart Etherington: That’s a very interesting question. I think the evidence would be that the relationship between tax and giving is complex. If the operation of the Gift Aid scheme was more effective, I think that we would see more giving.

Q84 Chair: But if more and more of the nation’s wealth is simply taken by the state, that leaves a smaller and smaller pot for the charities to fundraise from.

Sir Stuart Etherington: It’s a testable proposition, isn’t it, whether tax rates and giving are related? There’s not a lot of evidence in the UK that when we had lower tax rates giving was profoundly increased as a result, so I’m not quite sure that there’s a straight relationship between those two things.

Thomas Hughes-Hallett: I think, Chair, that this is a really important issue. The coalition Government are hoping, in this world of Big Society, that charities will fill the gap that has been left as public sector cuts take place. For the first time since 1948, some very vulnerable people will no longer have the safety nets that they are used to the state providing. We must replace those safety nets, and the only people who actually can do it are charities. And it’s at this moment-more than at any other time in the last 63 years-that the Treasury has got to help charities by making it easier and more desirable for people to give, because otherwise some of the most vulnerable people in our society are going to start falling through, and I’m really, really worried about it. I think the Big Society is a fine idea, and emphasising that society can play a bigger role is a fine idea. But at the end of the day, even if we get volunteering increasing dramatically, nothing can work properly without additional funding, and we’ve got to get it-not from Government, we know that. I believe the public want to give and will give, and we need to encourage them to do it.

Q85 Chair: So you’d be quite keen for us to have a Treasury Minister as well as the Minister from the Cabinet Office?

Thomas Hughes-Hallett: You might remark that it would be odd not to.

Charlie Elphicke: Do you also think that we should have an adjustment so that we call for a change of regulation in our report to encourage more charities like yours that do things and discourage charities that don’t do anything in these difficult times so that we ensure that there is a focus on the vulnerable?

Chair: I think we’ve already covered that point.

Q86 Paul Flynn: How does the Treasury ensure that there is increased giving from the public?

Thomas Hughes-Hallett: That’s always been the block in the past. The Treasury has always said two things before: first, "Unless you can prove it, we won’t do it"; and secondly, "England is different from America." I have a lot of sympathy with the first point and little with the second. If things have been proven to work in the United States, I think the Treasury should at least consider them-that’s all I’m saying. I think it’s fair to say that the announcement from the Treasury has been that there should be a further review of Gift Aid, and we’ve had so many reviews of Gift Aid.

Sir Stuart Etherington: It really is important that we get Gift Aid right. It is a cumbersome system and if you recommended nothing else, it would be to improve the effectiveness of Gift Aid, and I think that should be a serious question to the Treasury.

Q87 Chair: This is a very important aspect of the Big Society.

Sir Stuart Etherington: It is. As Tom says, if you want to change the balance between the state-and the expectation is that if you have a smaller state, you’ll have a bigger charitable sector and a bigger voluntary sector-you have to put in place clear policies to encourage that to happen. At the moment, not only is there a gap as public spending is reducing and the slack’s not being taken up, but, I think, there are one or two simple things that could be done by the Treasury to improve the situation, the principal one of which is to improve the Gift Aid structure.

Q88 Chair: What about corporate giving?

Sir Stuart Etherington: It’s quite low as a proportion in the sector. I think it’s less than 2% of the sector’s total income. There are two things that I think could happen in relation to corporate involvement with the sector. One is that there needs to be much more brokerage between the corporate sector and the voluntary sector, particularly at local level, where it doesn’t happen, or hardly at all.

Q89 Chair: What do you mean by brokerage?

Sir Stuart Etherington: I mean people who are responsible in the voluntary sector and the corporate sector for ensuring that relationships develop, particularly at a local level. Actually, there’s much more outgoing work between the two sectors.

Q90 Chair: But what does that mean if you’re a corporation in the Home Counties-for example my Essex constituency-employing a few hundred people or a few thousand people? What does that actually mean you need?

Sir Stuart Etherington: Well, you can get to know your voluntary sector locally, you get to know what it needs, and you can talk to charities locally about what they can do. You can begin to involve employee volunteering schemes; you can do matched funding.

Q91 Chair: What is the incentive for a corporation to do that?

Sir Stuart Etherington: The argument would be, I think, that healthy back streets make healthy high streets. Assisting your local community and engaging people in your local community improves the quality of your own work force. It improves the way in which people think the company is doing something good for its community, and so they have more of an affinity with their company. It also, I think, establishes brand reputation for companies, and I think that is quite important. Many companies do give, and I think they could do a lot more. One of the more recent developments in what is called corporate social responsibility is for companies to think about their skill set, and how that skill set can be applied. It isn’t just painting village halls. There was a recent example with Goldman Sachs. A foundation setting up a system for providing immunisation for people overseas did not have enough money to do it all in one year and was going to spread it over five years, which meant that people would die during that time. Goldman Sachs capitalised that and enabled it to do that in one year, so it was applying its own skill set to enable something to happen. Danone has done something similar with yoghurt manufacturing and distribution in India, for example, so there are examples of where companies have applied their own skill set.

Q92 Paul Flynn: But isn’t the Big Society a big con? Everyone’s in favour of this woolly concept in the same way that they were in favour of motherhood and thornless roses. But the Government have made a massive cut, and we know it’s going to affect those who are the beneficiaries of the good charities. In order to window dress it, they have put forward this concept of the Big Society in the way of selling it. We hear that they want to nationalise people’s good will. It’s mentioned that there’s someone in every street who goes round and helps elderly people out, gives them a lift, digs them out when the snow comes down. The good Samaritans are suddenly going to become part of a national force-a national citizen service, would you believe?-and anyone of my generation feels a chill of fear when there is mention of bringing back national service. The idea that the Government are going to take credit, or are seeking to take credit, for what people do out of the goodness of their hearts is not going to work. We’re still going to see these massive cuts, although there is not really any sincerity about them. The Government will still go on spending wildly on the things that Governments want to spend on: fighting wars and building weapons of mass destruction. There is a huge increase in the prices of food products, but there is no question of any cuts to farming subsidies. Governments will do what they want to do. The cuts will wound deep and they will have a serious impact of charities’ funding, and no amount of Big Society propaganda will help to soften the blow. Isn’t that right?

Thomas Hughes-Hallett: Just on the Big Society, I genuinely don’t have a view. I don’t quite understand it. I think part of its strength, if I do have a view, is that at least it makes people talk about it. But more importantly than that, I think that the Government can lead from the front here. Three years ago, Tesco supported Marie Curie. It got the whole workforce behind us and raised £6.5 million for Marie Curie. The Government are the largest employer in this company. I would love to be the NHS’s charity of the year, but there is no such category. I believe that public servants and public service now need to lead the way in supporting charities and providing volunteering programmes. There is actually some encouraging stuff in the Green Paper about that, but I think that the Government really needs to be held to account on this. And the other area that I think would be hugely helpful would be if charities worked very closely with unions and their huge memberships, again in terms of working together to see how we can fill the gap that is emerging. I’ve started talking to Unison in that respect.

Q93 Charlie Elphicke: Do you think that trade unions should do that with their membership as well by having more corporate social responsibility and encouraging payroll giving?

Thomas Hughes-Hallett: Absolutely. I think all employers should, but not just unions. I think all employers. Payroll giving has been a massive failure. It’s something we’ve got wrong for charity.

Q94 Robert Halfon: It’s harder for the NHS. The hospitals within the NHS often have their own charitable fundraising activities to pay for a new dialysis machine, so that tends to be where the charitable activities focus. It’s very hard for them to say, "We’re raising money for an extra machine," and then say, "We want to fund another charity as well."

Thomas Hughes-Hallett: Absolutely, but that doesn’t leave out all the commissioning bodies and the many millions of people who are employed in this area.

Q95 David Heyes: Sir Stuart, you said very early in your evidence that the cuts were beginning to bite, that funding gaps were beginning to appear. I think you gave the example of the Birmingham CAB-as a former CAB manager, I could certainly immediately relate to that problem-at a time when I guess the need for those kind of advice services are going to be greater as we move forward into more and more cuts, so there’s a real irony there. In my constituency, that sort of pace-of-change problem is leading to those unintelligent cuts, and I can think of a number of vital voluntary organisations that have severe threats to their existence-not just to the range of services that they deliver. Just picking one example out, there are question marks against the viability of a volunteer bureau in my constituency. It plays a vital role in making links between dozens of voluntary organisations and hundreds-possibly thousands-of people by channelling them, training them, supporting them and helping to increase the quantity of volunteering time that’s given. We are really desperately short of people giving time at that individual level. I think that there are probably two parts to my question. First, is the pace of change just too much? Does it need to be slowed down so that we don’t continue to get these unintelligent cuts? Secondly, what can we do to encourage and support more individual volunteering of the type that emerges from the volunteer bureau movement?

Sir Stuart Etherington: I think the Government slightly got the message about volunteer bureaux, because in the Green Paper there’s a proposal to fund them directly.

David Heyes: As I say, it’s a question mark, not a certainty.

Sir Stuart Etherington: Exactly. In terms of the nature of the cuts, we did some work for the Government on which voluntary organisations were likely to be most vulnerable to cuts. We looked at three factors. One was the area in which the organisation was operating; not the geographic area, but whether they were doing employment and training, whether they were doing care, or whether they were doing health services. Secondly, we looked at the proportion of public spending in those categories, and then, thirdly, we looked at the level of assets that those organisations had. This was all aggregate analysis; we couldn’t do individual charities, but we looked at those industries and we communicated the vulnerable areas. The vulnerable areas are employment and training, because mainly it’s done under contract to the Government-it is about 90% Government funded-and because it’s tight contracts, they’ve never had the ability to develop reserves, so they have no assets. So they’re very vulnerable to policy changes, and that is why you’ll see a lot of employment organisations under threat at the moment. Advice services-Citizens Advice and advice services in general-locally, although not necessarily nationally, are also vulnerable. They have not much assets and get quite a lot of public money. Health and social care come next. Then you go down into areas that are less vulnerable: faith groups and foundations are not so vulnerable, so there’s a level of vulnerability. I think that the Government have created a £100million transition fund, based on that evidence.

Q96 David Heyes: Is that anywhere near adequate?

Sir Stuart Etherington: No, it’s not, because we think the cuts are going to be much bigger than that. Estimates vary, but we think that somewhere in the region of £3 billion is not unlikely, because it’s easier to cut voluntary organisations than it is to cut your core service. I think that there will be cuts in the service. The problem is that the decisions are coming very late, and organisations are not quite sure, even now, where they will be on 1 April. That might well be as a result of the local authority spending settlement, but some of these decisions are coming in quite late, and you’ve got quite a lot of planning blight. It’s quite difficult to know what you would actually do about that, but it’s certainly the case. In relation to volunteering, I think that volunteer bureaux play an important part in encouraging people to come forward and volunteer, and I think they’ve got to be part of the mix. There’s got to be capability to recruit volunteers, but you recruit a lot of volunteers, too, Tom.

Thomas Hughes-Hallett: Yes, we have 10,000 regular volunteers and up to 100,000 volunteer for us every year. I think, again, that this is part of something the sector’s got to develop. The other day one of my colleagues told me-this is a story against Marie Curie-we have a waiting list at one of our hospices, and I just tore all my hair out, or what little is left, because that shouldn’t be the case. But, actually, we’ve got to get better at coming up with constructive ideas for volunteers and making it attractive. We now have a rule in Marie Curie that none of my colleagues can employ anyone unless first of all we’ve tried to fill that role with a really good volunteer. And that can be at any level-dare I say at Chief Executive level, if necessary-and our head of policy is actually a volunteer.

Q97 Robert Halfon: Do you think that as part of the school curriculum, even in primary school, there should be social action days at least once a month so that you instil the culture of volunteering or charitable work?

Sir Stuart Etherington: And giving. About four years ago, NCVO ran a campaign with Inland Revenue-in fact just after the Gift Aid changes were made, so it was more than four years ago-called the Giving Campaign. It had a number of different elements, and one that continued to be funded was called G-Nation, which is a programme of work run by the Institute for Citizenship in schools about giving. There were competitions about giving and choosing your charity and why you choose it. If you’re going to instil a culture of giving, I think that you have to start very young, and I think that’s an important component of any giving campaign.

Q98 Robert Halfon: But literally social action-going into the community and looking after meals on wheels, or whatever it might be-once a month, at least. And it would be compulsory.

Thomas Hughes-Hallett: It’s got to be fun and it’s got not to be mandatory.

Q99 Robert Halfon: Yes, but it won’t happen unless it’s part of the national curriculum.

Thomas Hughes-Hallett: I’m not sure about that, with respect. Sorry to quote Marie Curie again, but we raised £450,000 last year from something called Mini Pots of Care, and the vast majority of primary schools in this country had them. The children grew daffodils. Unfortunately, one of our suppliers provided us with tulips, so it was a surprise when tulips started coming up, but it raised a huge amount of money for Marie Curie-really a lot of money. The children loved it. They were growing these Pots of Care, and there was some basic teaching around health care. It wasn’t about terminal care; it was just some basic teaching around smoking and diet that wrapped around it, so the teachers loved it. But it wasn’t mandatory, so it wasn’t yet another thing that’s got to go into the curriculum, which is a real problem for teachers. It was actually something that helped fill fun time, but also had a lesson to attach to it. I think, again, something the sector’s got to get better at is, rather than looking to Government to make things mandatory, finding ways of getting in there.

Q100 Lindsay Roy: It’s been a very illuminating discussion. I think we want to pay credit to you and all those who give their time, money and expertise. However, we live in very volatile times and uncertain times. I’d like to get your view on where the ultimate responsibility lies for providing a safety net for the most vulnerable people in our society. Is that still a role for a state?

Thomas Hughes-Hallett: In the world that I work in, I believe if you can have a hip replacement on the state for free, then surely the end of your life should be cared for by the state for free as well. But I’m also a practical man, and I want to make sure that everyone has a good experience at the end of life, so we need to get out there and shake the tins in the streets to raise the money for the nurses who are funded by Marie Curie. I think it’s difficult. We’ve got used to it being the state, and I think that’s one of the reasons why we are not so generous as the Americans, as Stuart said earlier, or the Australians. The fire service in Australia-and the ambulance service, I think I’m right in saying-is entirely funded by local communities, so I have very mixed feelings about this. All I know is the practical reality, which is that the safety nets are beginning to be not there for the first time since I was born.

Q101 Mr Walker: Are there too many charities, Sir Stuart?

Sir Stuart Etherington: No, I don’t think there are, but I think what we can do is to encourage organisations to collaborate more effectively. There are lots of ways in which that can be done. I think it’s a citizen’s right to form a charity, to associate, and to respond to a social need, and I wouldn’t want to say that you refuse them that right, but I think there are ways that people can be encouraged to collaborate. The Charity Commission advises organisations when they seek to register if there’s a similar organisation doing similar things and ask whether it wouldn’t be better to apply their talents there. But, ultimately, I think if people are pursuing charitable objectives, they have a right to form a charity. But I would encourage them to collaborate. In fact, we give advice and information on how to collaborate. There is a tax disincentive to collaborating, in that you have to save at least 20% because you can’t reclaim VAT, so there’s something that could be done-the Treasury’s looking at this, but looking at it in my view very slowly-in that there is a tax disincentive to organisations working together. We can provide you with more information.

Mr Walker: They would say that in straitened times with less money there would be more of an imperative to collaborate, so again that supports the Chair’s view that we should get a Treasury Minister here.

Chair: There’s a whole list of things we could ask the Treasury about.

Q102 Lindsay Roy: Just as a follow-up. In your view, how well does the state make a qualitative judgment in relation to funding provided to charities in terms of outcomes?

Sir Stuart Etherington: That’s a very important point. More work is being done on outcomes and impact, and that, I think, is becoming increasingly an important component in funding decisions from the state. They are looking at outcomes. They tend, I think, in unintelligent procurement, to focus too much on process-how many of this and what was the cost of your stamps etc., rather than saying, "These are the outcomes we want to see, and this is the price that we’re prepared to pay."

Q103 Lindsay Roy: And is it a mixed picture within the charity sector itself in terms-

Sir Stuart Etherington: In terms of outcomes? Yes it is. I think some charities don’t focus sufficiently on the impact that they’re having and aren’t able to articulate that, and I think that influences donor behaviour as well. As a donor, I quite like to know what impact a charity is having on its constituents.

Q104 Paul Flynn: What’s your best hope and your worst nightmare for what the situation will be in 2015?

Sir Stuart Etherington: I’ll start with the nightmare: significant public spending cuts have a knockon effect on the charitable sector, which has become more dependent on public spending, and no other income sources rise in a way that compensates for that, so actually you have a squeeze. We’ve become dependent on public finance to deliver services-40% of the sector’s income now comes from that. If that goes down and nothing comes to replace it, that’s the nightmare. The best scenario is that charities overall develop a much more balanced approach to funding and are not as driven by public finance, so that if you looked at a charity, it might have some public money to deliver its services, because the state wants it to, but it’s balancing that with voluntary income and possibly social investment as well.

Q105 Paul Flynn: Mr HughesHallett, what about yours?

Thomas Hughes-Hallett: My best hope would be that when you leave this room to go to the coffee machine in five years’ time, you talk about who you’ve given money to this year and that becomes part of normal conversation culture, which it absolutely isn’t at the moment. My worst nightmare is that personal tax rates have to go up to fund a diminished state, as a result of which giving falls sharply.

Q106 Chair: But that’s what we don’t do in this country. It’s embarrassing to brag about who you’ve given money to. It’s a sort of Jeffrey Archer thing to do, isn’t it?

Thomas Hughes-Hallett: It is a real problem. I made a donation to the Suffolk Community Foundation the other day of £100,000, and it was in the paper. It asked my permission to put it in the paper because it would encourage other people to give as well. The only comment I’ve had from my friends is that I was showing off, whereas in America that would be absolutely standard.

Q107 Chair: But the answer is, "Yes, I am showing off and aren’t you jealous?"

Thomas Hughes-Hallett: Yes, well maybe.

Mr Walker: It depends on what tone of voice they use. It could have been a generous tone of voice.

Thomas Hughes-Hallett: On the whole it was.

Robert Halfon: It’s true, because if you go abroad, whether it’s America or Jews giving money to Israel, there are always buildings all over the place with, in big letters, "The Mr Bloggs Building", or whatever it might be, and in America you see it all the time.

Chair: I forgot to declare my interest at the outset: I have raised and given money to Combat Stress.

Thomas Hughes-Hallett: Good.

Q108 Paul Flynn: Why don’t chuggers approach people over 40?

Thomas Hughes-Hallett: I think that they take the view-this is with absolutely no disrespect to the point you’ve made, which is exactly the one that my trustees make to me all the time-that this is a disgraceful form of fundraising. Actually, I have to tell you, that financially it is almost the most efficient in terms the funds that can be raised.

Paul Flynn: So it is only the foolish under-40s?

Thomas Hughes-Hallett: Only the foolish under-40s fall for it.

Q109 Chair: You mean that for those who pay commission, it’s actually a very efficient way of raising money?

Thomas Hughes-Hallett: No. For those charities that don’t give their chuggers commission, which we don’t, it becomes the most efficient form of fundraising.

Q110 Chair: Finally, just in the last minutes: the Big Society Bank-is this just another gimmick?

Sir Stuart Etherington: No, I don’t think it is, actually. Some might have a different view, but I think there is a suggestion that the third leg of charitable finance could be social investment: loans, social impact bonds and new financial instruments. I don’t think Tom thinks it’s going to be a third leg, but I think it might be a third leg, and the Big Society Bank predates the Government-it used to be called the Social Investment Wholesale Bank. The idea is that it will start to capitalise some of the social investment institutions that are out there, such as Charity Bank, Triodos, Unity Trust-banks that lend to charities and other social enterprises-and I think it has potential to develop that market. Tom, you don’t.

Thomas Hughes-Hallett: I am just a total Luddite on this. I find it wonderful, having been a banker-I left in 2000-that what nearly brought the banking system down was inappropriate lending, but we are now potentially setting up a system to encourage the most vulnerable charities to borrow money. There has also been a rather bizarre suggestion from the Association of Chief Executives of Voluntary Organisations that there should be compulsory tax on bonuses that should be given to this bank so that the money can be made available to the most vulnerable charities. Well, I think it is beneficiaries who should be vulnerable, not charities, and if charities are vulnerable, that might be because they are mismanaged. I am very sceptical. In the 10 years and three months that I have been Chief Executive of Marie Curie, we have never borrowed one penny, and while I’m Chief Executive, we never will. At this moment in time there are lots of words bandied around that, bluntly, nobody understands, such as "social action", "social innovation" and "social impact bonds". The public don’t have a clue what people are talking about, but basically charities are being encouraged to borrow. I’m sorry, but I don’t like it-call me old-fashioned.

Mr Walker: No, I think you’re very sensible.

Q111 Robert Halfon: Two final questions if I may. On the Big Society Bank, would a better model have been a giant credit union in which charities could have saved and then received a return, which would have been a voluntary institution that could have been topped up with the assets of unclaimed assets and so on?

Thomas Hughes-Hallett: I think that’s an excellent idea.

Sir Stuart Etherington: It does exist in a form. Charities Aid Foundation has something where you can actually place money on investment and you get a return on that.

Q112 Robert Halfon: This would be particularly because of your point, which I accept, about smaller charities. Smaller charities would be able to save a proportion, and it would work exactly like a credit union. It would be a giant credit union for the charities.

Sir Stuart Etherington: There are common investment funds. There are vehicles that charities use to pool their money to get a return.

Q113 Robert Halfon: My final question, which is a different thing that you touched on earlier in your remarks. You said briefly that the National Lottery had looked for a short time at the allocation of money. Would one way of solving this problem be if, when people bought a lottery ticket, there were three options on it so that they could tick for a local charity, a national charity or an international charity? Okay, that wouldn’t be perfect, but at least when people bought their ticket they would have some idea of how their money was going to be spent, because at the moment it’s still decided by the great and the good, and no one has a clue about how the money is allocated, and people see it to be an unfair and unjust allocation of funds.

Sir Stuart Etherington: I think it’s quite difficult to do that in a fair way with 180,000 charities, in fairness. One way it’s done, interestingly, is as part of Waitrose’s corporate social responsibility. I don’t know if you shop in Waitrose, but you get a green token that you put in a transparent box, and money goes to one of three charities that the local store has chosen. I think that’s quite a motivator for giving, because you feel that you know where the organisation is going to allocate it. But the Lottery is on a different scale, and there are a lot of charities, so I’m not so sure how you would do that.

Q114 Robert Halfon: But if you could work out the nuts and bolts, would it be an idea you would support?

Sir Stuart Etherington: I think a way of doing it is to get views from the public about where the money goes. It’s quite difficult to get a direct system to operate, because there are just so many charities, and the Lottery is going to be under increasing demand because that’s where charities are going to turn as their public money goes down. If charitable income doesn’t rise at a significant rate, they’re going to form a queue at the National Lottery, so there is going to be a much greater demand for Lottery funds.

Q115 Robert Halfon: In essence, what I’m saying-going back to Comic Relief and so on-is that too much of the money that goes to charity is decided by the great and the good rather than the public themselves. I want to work out a mechanism through which the public have much more say on how their charitable money is spent.

Chair: But won’t they just give more and more money to animals?

Robert Halfon: Not necessarily. I could bet you that thousands of people in my constituency would give money to your organisation.

Mr Walker: I’m very involved in mental health, and they wouldn’t give any money to mental health charities. With the greatest and most enormous respect to cancer charities-my father died at 46 from cancer, so I know what a devastating illness it is-there is a danger that large, emotive charities, particularly in the cancer field, are going to crowd out other charities when it comes to giving, so there is a role for the great and the good.

Thomas Hughes-Hallett: I completely agree with you, and I think that one of the problems we have is the most needed charities are very often the least populist-dare I say even with politicians. In fact, I cornered the Prime Minister shortly before the election and said, "You must get your speechwriters to put mental health and end-of-life care in your speeches sometimes." He was very grateful for the remark, actually-he said it was a very fair point. I used to be a trustee at Great Ormond Street Hospital, and I also used to chair the Michael Palin Centre for Stammering Children. It’s quite easy to raise money for those two organisations, but raising money for mental health and end-of-life care is really difficult. It’s just not very sexy.

Q116 Chair: Are there any further questions? Is there anything you’d like to add that you feel we’ve missed?

Thomas Hughes-Hallett: Could I add just one thing? When and if you interview the Treasury Minister, or whoever, I think there is potentially one area of great growth in charitable giving: lifetime legacies. A quarter of our income comes from legacies, and the person who gives the money never gets any of the pleasure from giving it because he’s six foot under, so it’s your lawyer who gets the pleasure. A lot of work has been done on this in this country and in America, and we think, with no loss to the Treasury, that when you decide that you want to give your house away after your death to a charity-because you might be the sole survivor, you may be single, your wife may have died or whatever-how nice it would be to be able to do that in your own lifetime, rather than allow your lawyer to be the only person to get thanked. I just wanted to make that point.

Chair: Preferably without having to pay capital gains tax, if it’s a second home.

Thomas Hughes-Hallett: The Government shouldn’t suffer in any way.

Chair: This has been an immensely helpful session for us. Thank you very much. One of the advantages of not cluttering our time up with the Minister is that we’ve had more time with you than we would have done. I think I would invite you to submit anything in writing to us before we interview Ministers, and I might suggest to the Clerk that we actually do a proper call for evidence on the whole question of the giving White Paper before we have Ministers in front of us, because I think you’ve given us very good food for thought. Thank you very much indeed.

[1] Note from witness: Correction – man who comes from a family that gives several million pounds away a year.