DCH 143 Inchbald School of Design
Submission on the Draft Charities
Bill
By
Courtenay Inchbald
Inchbald School of Design
7 Eaton Gate
London SW1W 9BA
020 7730 5508
c@inchbald.co.uk
1 I make this submission as a representative
of a for-profit higher education institution that competes legitimately
with so-called "charities".
2 In the draft Bill, charities are
defined as not-for profit organisations engaged in activities
that are in the public interest.
3 Neither of these criteria are
directly related to charity:
3.1 Charity involves the act of giving,
which is clearly different from being a not-for profit organisation.
3.2 The activities of numerous organisations,
not just charities, are in the public interest.
4 In the Bill it is not clear that
this matters very much because the advantages given to charities
are not outlined. However these benefits, which currently include
VAT exemption, an 80% business rate rebate, and corporation tax
exemption, are very substantial and allow many organisations defined
as "charities" to compete unfairly, contrary to EU Competition
Law, with legitimate for-profit businesses.
5 For example, in competing for
a Chinese student, the education of whom is of no benefit to the
British public:
5.1 The Inchbald School of Design, which
offers a postgraduate diploma course accredited by the University
of Wales, pays in relation to that student: 17.5% VAT (c. £3000);
c. £350 business rates; c. £2000 rent and building maintenance;
and c. £250 Corporation tax; totalling £5600.
5.2 The profit-making British campus of
a foreign University defined as a "charity" pays only
the rent and 20% of the business rates, giving it a £3525
advantage over the Inchbald School of Design.
5.3 A state sector university pays only
20% of the business rates giving it a £5525 advantage over
the Inchbald School of Design.
6 This very badly distorts competition.
7 Underlying the draft Bill is the
crude assumption, not just that charity is good, but that profit
is bad and that attempts to make a profit are always obscenely
successful. In fact, the only difference between a for-profit
organisation and a not-for-profit organisation is that the former,
when it makes a profit, might distribute a few percent of turnover
to shareholders. This is no reason to penalise a for-profit organisation
with a 20-30% cost disadvantage.
8 In any competitive environment,
fair competition makes the distinction between for-profit and
no-for-profit irrelevant to consumers who simply need to compare
product quality with price. Organisations competing in competitive
marketplaces must therefore all be treated equally.
9 In summary:
9.1 Acts of charity should be encouraged,
possibly, as they are now, by tax relief on donations. The draft
Bill is not concerned with this aspect of charity law.
9.2 Activities that are in the public
interest must be defined so that they can be encouraged and only
organisations engaged in them (regardless of their profit-making
status) can benefit from acts of charity and any Government incentives.
The draft Bill suggests areas of activity in the public interest
and includes charitable organisations and non-charitable not-for-profit
organisations. But it excludes for-profit organisations whose
products and services contribute equally in the public interest,
which does and will continue to severely distort competition in
some marketplaces.
9.3 Organisations benefiting from acts
of charity must be controlled to ensure that benefactors' funds
are used as intended. The draft Bill addresses this need.
|
