DCH 195 Memorandum from Nuffield Foundation
1. The Nuffield Foundation is an endowed charitable
Trust established in 1943 by William Morris, Viscount Nuffield.
It aims to advance social well being by research and practical
development. It does this by making grants, principally to universities
and voluntary sector bodies, and by carrying out its own projects.
The Foundation has an endowment of £200m and an annual expenditure
of £9m.
2. The Foundation responded positively to the
Strategy Unit report Private Action, Public Benefit and
in broad terms we welcome the draft Bill. We welcome in particular
the proposals to clarify the definition of what is a charity,
to pin this firmly to the notion of public benefit, and to modernise
the structure and functions of the Charity Commission.
3. In this response we comment on three related
matters: the proposed objectives of the Charity Commission; the
relationship between the Commission's advisory and regulatory
roles; the degree of accountability and regulation appropriate
to endowed trusts such as this Foundation.
4. The Bill proposes that the Charity Commission
should have four regulatory objectives. The third of these is
to "enable and encourage charities to maximise their social
and economic impact". This, we suggest, is inappropriate.
First, "social and economic impact" is rarely something
that can be unambiguously measured, and the Charity Commission
is not well placed to try. More important, it conveys a misleading
picture of charities as simply deliverers of services. Of course
some charities do precisely this, but many more do not. Much
of what is distinctive and valuable about the sector, its independence
and the diversity of its approach, cannot be described in these
terms. To do so risks introducing inappropriate targets, with
all the perverse consequences that can follow
5. Linked to this is the question of the extent
to which the Charity Commission should offer advice. We agree
with the Strategy Unit's analysis of this issue. Clearly it is
helpful for the Commission to offer advice in areas where it has
regulatory authority, but we do not think it should extend beyond
this. On matters of staff management, or on investment issues,
for example, it has no particular competence or authority, yet
its position as regulator means that charities will feel under
pressure to follow its advice. As the Strategy Unit report pointed
out, this is confusing and inappropriate.
6. One of the main purposes of the Bill is to
put in place a modern and robust regulatory structure. This is
greatly to be welcomed, but it is important that the new structure
is one that is capable of recognizing the great diversity of the
sector and responding accordingly. One important dimension of
this is the degree to which charitable bodies depend on public
or private funding. The Nuffield Foundation receives certain
tax benefits. To that extent we are spending public money and
it is appropriate that we should be accountable and subject to
charitable regulation. But the foundation has independent means.
It does not rely on public fundraising and does not receive government
grants and contracts. It is not obvious why it should be subject
to the same level of regulation and accountability as an organisation
that raises all its funds from the public.
7. It would be difficult to recognize this difference
by giving endowed foundations different status within the bill
and we do not argue for this. But the need could perhaps be met
by an overarching requirement that the degree of regulation imposed
by the Charity Commission should be reasonable, proportionate
and fair. This could, if necessary, be tested through the proposed
new appeal mechanisms. As others have argued, this overarching
requirement would in any case be an important safeguard.
8. We share the government's wish to encourage
more private philanthropy, and in particular to encourage wealthy
donors to set up charitable foundations. Whether this happens
will depend on the perceived balance between the benefit of tax
relief on the one hand and the cost of the regulatory burden on
the other. Our concern is that the effect of the Bill may be
to tilt the balance the wrong way. The additional burden of regulation
may also act to discourage individuals from taking on the role
of Trustees. The Strategy Unit's report was entitled Private
Action, Public Benefit. The danger is that the Bill may be
focusing too much on the latter, to the neglect of the former.
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