House of Commons Public Administration Select Committee

The Big Society

Seventeenth Report of Session 2010–12

Volume II Oral and written evidence

Additional written evidence is contained in Volume III, available on the Committee website at www.parliament.uk/treascom

Ordered by the House of Commons to be printed 7 December 2011

HC 902-II [Incorporating HC 716] Published on 14 December 2011 by authority of the House of Commons London: The Stationery Office Limited £13.00

The Public Administration Select Committee

The Public Administration Select Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration and the Health Service Commissioner for England, which are laid before this House, and matters in connection therewith, and to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service.

Current membership Mr Bernard Jenkin MP (Conservative, Harwich and North Essex) (Chair) Alun Cairns MP (Conservative, Vale of Glamorgan) Michael Dugher MP (Labour, Barnsley East) Charlie Elphicke MP (Conservative, Dover) Paul Flynn MP (Labour, Newport West) Robert Halfon MP (Conservative, Harlow) David Heyes MP (Labour, Ashton under Lyne) Kelvin Hopkins MP (Labour, Luton North) Greg Mulholland MP (Liberal Democrat, Leeds North West) Priti Patel MP (Conservative, Witham) Lindsay Roy MP (Labour, Glenrothes)

The following members were also members of the Committee during the inquiry: Nick de Bois MP (Conservative, Enfield North) Mr Charles Walker MP (Conservative, Broxbourne)

Powers The powers of the Committee are set out in House of Commons Standing Orders, principally in SO No 146. These are available on the Internet via www.parliament.uk

Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/pasc.

The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume(s).

Additional written evidence may be published on the internet only.

Committee staff The current staff of the Committee are Martyn Atkins (Clerk), Alexandra Crampton (Committee Specialist), Paul Simpkin (Senior Committee Assistant) and Su Panchanathan (Committee Assistant).

Contacts All correspondence should be addressed to the Clerk of the Public Administration Select Committee, Committee Office, First Floor, 7 Millbank, House of Commons, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5730; the Committee’s email address is [email protected].

Witnesses (Funding the Voluntary Sector)

Tuesday 18 January 2011 Page

Sir Stuart Etherington, Chief Executive, National Council for Voluntary Organisations, and Thomas Hughes-Hallett, Chief Executive, Marie Curie Cancer Care Ev 1

Wednesday 16 February 2011

Nick Hurd MP, Minister for Civil Society, Cabinet Office, and Justine Greening MP, Economic Secretary, HM Treasury Ev 18

Tuesday 3 May 2011

Sir Sandy Crombie, Senior Independent Director, Royal Bank of Scotland, Robert Mirsky, Head of Hedge Funds UK, KPMG, Martin Brookes, Chief Executive, New Philanthropy Capital, and Chris Blackhurst, City Editor, London Evening Standard Ev 33

List of printed written evidence (Funding the Voluntary Sector)

1 Supplementary written evidence from Justine Greening MP Ev 50 2 Supplementary written evidence from National Council for Voluntary Organisations (NCVO) Ev 51 3 National Association for Voluntary and Community Action (NACVA) Ev 53 4 Charities Aid Foundation (CAF) Ev 59 5 CASE and the Ross Group Ev 66 6 Lloyds Banking Group Ev 67 7 Barclays Ev 68

List of additional written evidence

(published in Volume III on the Committee’s website www.parliament.uk/pasc)

Page 1 Steven Leach (BS 01) Ev w1 2 Nigel Pimlott (BS 02) Ev w2 3 Heather Brown (BS 03) Ev w4 4 UNISON (BS 04) Ev w5 5 Mary Kenning (BS 05) Ev w9 6 Hitchin Bridge Club (BS 06) Ev w10 7 Eastfield Voice (BS 07) Ev w11 8 Pathway Project (BS 08) Ev w12 9 University of Gloucestershire (BS 09) Ev w13 10 Friends, Families and Travellers (BS 10) Ev w15 11 Philip Morgan (BS 11) Ev w17 12 Chill4us (BS 12) Ev w17 13 John Murphy (BS 13) Ev w18 14 Wandsworth Voluntary Sector Development Agency (BS 14) Ev w19 15 Professor George Jones and Professor John Stewart (BS 15) Ev w20 16 Kevin Kelleher (BS 16) Ev w23 17 Children England (BS 17) Ev w29 18 Surrey Heritage (BS 18) Ev w33 19 Paul Griffiths (BS 19) Ev w34 20 Ian Clark (BS 20) Ev w36 21 Greater London Volunteering (BS 21) Ev w37 22 Geoff Etherton (BS 22) Ev w41 23 Claire Whetstone, Enfield Children and Young Persons’s Services (BS 23) Ev w41 24 LASA (BS 24) Ev w42 25 Gateshead voluntary Organisations Council (BS 26) Ev w44 26 One North West and Just West Yorkshire (BS 27) Ev w46 27 Involve Foundation (BS28) Ev w49 28 Action with Communities in Rural Kent (BS 29) Ev w53 29 RSPCA (BS 30) Ev w56 30 Institute of Fundraising (BS 31) Ev w58 31 Devon Association of CVS (BS 33) Ev w60 32 Robert Ashton (BS 34) Ev w63 33 Voice4Change England (BS 35) Ev w65 34 Anonymous (B36) Ev w66 35 Waterloo Action Centre (BS37) Ev w67 36 Charities Evaluation Services (BS 38) Ev w70 37 General Assembly of Unitarian and Free Christian Churches (BS 39) Ev w74 38 Equality and Diversity Forum (BS 40) Ev w76 39 NAAPS (BS 41) Ev w78 40 Volunteer Cornwall (BS 42) Ev w82

41 Foyer Federation (BS 43) Ev w85 42 Royal National Institute of Blind People (BS 44) Ev w87 43 Publitas Consulting LLP (BS 45) Ev w90 44 BTCV (BS 46) Ev w93 45 Educational Centres Association (BS 47) Ev w97 46 Headway (BS 48) Ev w100 47 Lancashire Association of Councils for Voluntary Service (BS 49) Ev w101 48 TimeBank (BS 50) Ev w104 49 Community Links (BS 51) Ev w107 50 MEND (BS 52) Ev w111 51 Locality (BS 53) Ev w112 52 Cancer Research UK (BS 55) Ev w115 53 North West Environment Link (BS 56) Ev w116 54 Exeter Council for Voluntary Service (BS 57) Ev w119 55 BMA (BS 58) Ev w122 56 Learning, Skills and Employment Network (LSEN) (BS 59) Ev w123 57 Basis Project (BS 60) Ev w124 58 NESTA (BS 61) Ev w127 59 Ipsos Mori (BS 62) Ev w130 60 Keep Britain Tidy (BS 63) Ev w134 61 Charity Finance Directors’ Group (BS 64) Ev w137 62 National Council for Voluntary Youth Services (BS 65) Ev w140 63 Our Society (BS 66) Ev w144 64 British Red Cross (BS 67) Ev w148 65 The Intercom Trust (BS 68) Ev w152 66 Altogether Better (BS69) Ev w155 67 Faith in Affordable Housing (BS70) Ev w156 68 Home‐Start UK (BS 71) Ev w158 69 Lifeline (BS 72) Ev w160 70 UnLtd (BS 73) Ev w165 71 Voluntary Centre Services North Kesteven (BS 74) Ev w168 72 Age UK (BS 75) Ev w172 73 Simon Skidmore (BS 76) Ev w175 74 LGF (BS 77) Ev w178 75 Chartered Institute of Library & Information Professionals (CILIP) (BS 78) Ev w182 76 Barbara Weldon (BS 79) Ev w186 77 South West Forum (BS 80) Ev w187 78 LGiU (BS 81) Ev w188 79 Open Source Consortium (BS 82) Ev w193 80 Tavistock Institute of Human Relations (BS 83) Ev w195 81 Network for the Post Bureaucratic Age (BS 86) Ev w198 82 Unite (BS 87) Ev w200 83 PCS (BS 88) Ev w204 84 Farming and Wildlife Advisory Group (BS 89) Ev w208 85 Dragon Preparatory School (BS 90) Ev w211

86 Land and Society Commission (BS 91) Ev w212 87 Involve Yorkshire and Humber (BS 92) Ev w213 88 Foundation Trust Network (BS 93) Ev w214 89 Professor Nicholas Deakin and Professor Marilyn Taylor (BS 94) Ev w216 90 Voluntary Action Broxtowe (BS 95) Ev w219 91 Voluntary Action Leicester (BS 96) Ev w221 92 Nappy Alliance (BS 97) Ev w223 93 Volunteering England (BS 98) Ev w226 94 VSNW (BS 99) Ev w231 95 Andrew Pressland (BS 100) Ev w235 96 Changemakers (BS 101) Ev w237 97 ESRC Third Sector Research Centre (BS 102) Ev w240 98 Community Resilience UK (BS 103) Ev w245 99 NCVO (BS 104) Ev w248 100 LGA (BS 105) Ev w252 101 Sue Ryder (BS 106) Ev w256 102 FSI (BS 107) Ev w259 103 Nottinghamshire Infrastructure Consortium (BS 108) Ev w261 104 Places for People (BS 109) Ev w263 105 Eileen Conn (BS 110) Ev w266 106 Employee Ownership Association (BS 111) Ev w268 107 Linda Ware (BS 112) Ev w272 108 London Civic Forum (BS 113) Ev w273 109 Urban Forum (BS 115) Ev w276 110 Just Lincolnshire Equality & Human Rights Council (BS 117) Ev w280 111 Further written evidence submitted by UNISON (BS 118) Ev w281 112 Further written evidence submitted by Age UK (BS 119) Ev w282 113 ACEVO (BS 120) Ev w285 114 Further written evidence submitted by Locality (BS 121) Ev w286 115 Further written evidence submitted by ChangeMakers (BS 122) Ev w289 116 Further written evidence submitted by Unite (BS 123) Ev w291 117 Further written evidence submitted by NESTA (BS 124) Ev w293 118 Further written evidence submitted by London Civic Forum (BS 126) Ev w296 119 Letter from Rt Hon Oliver Letwin MP, Minister for Government Policy, Cabinet Office, Rt Hon Chris Grayling MP, Minister for Employment and Rt Hon Grant Shapps MP, Minister for Housing (BS 128) Ev w299

Public Administration Committee: Evidence Ev 1

Oral evidence

Taken before the Public Administration Select Committee on Tuesday 18 January 2011

Members present: Mr Bernard Jenkin (Chair)

Charlie Elphicke David Heyes Paul Flynn Lindsay Roy Robert Halfon 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 about 40% of the sector’s income now comes from morning. We’re sorry you’re not going to be followed public spending, principally from contracting to by the Minister today, but we will have the Minister provide services in three main areas: health; social to follow up this session on a future occasion. Could care; and education, employment and training. Those you just introduce yourselves for the record? organisations that have a significant amount of public Sir Stuart Etherington: Thank you, Chair. I am Sir spending clearly are in some difficulties in the current Stuart Etherington. I’m the Chief Executive of the environment, particularly given the pressure on local National Council for Voluntary Organisations. government spending, which is where quite a lot of Thomas Hughes-Hallett: I am Thomas Hughes- charities are funded from. The report, I think, was an Hallett. I’m Chief Executive of Marie Curie Cancer attempt to look, in the main, at non-statutory funding Care and also a trustee of the Esmée Fairbairn sources to see what possibility there was to diversify Foundation, which is a very significant charitable the funding base of the sector, and in particular to trust—it gives away about £25 million a year. drive up philanthropy and social investment, which is seen as the third potential leg of funding. Q2 Chair: Thank you very much indeed. I wonder if we could start with what prompted the Q3 Chair: Sorry, can you just explain a bit more Committee to move swiftly to this subject: the NCVO about that? When you say “non-statutory funding”, report produced at the end of last year called Funding what do you mean? the Future. It was produced by a funding commission Sir Stuart Etherington: There are three principal that included Unity Trust, Capacitybuilders and the income streams that the sector has. One is money Joseph Rowntree Foundation. The report points out: from the state, either in the form of grants or contracts. “we are about to witness the biggest cuts in public expenditure and the most radical changes to public Q4 Chair: And that’s what you mean by statutory services, since the Second World War” and that the funding? “outlook for voluntary funding is uncertain”. The Sir Stuart Etherington: That’s statutory funding, and report presents two possible scenarios: first, that “the increasingly that’s contract funding. The second present pattern of public services is cut to the bone, element is philanthropy, and that’s in the broadest serving fewer and fewer people. Commercial sense, so it might be legacies, individual donations, or organisations take over the running of many of the money from direct mail or collections on the street— services that are left”. The alternative—rather rosier— what the public think of as charitable donations of scenario is that there is a “radical shift through which the present pattern of public services and models for various kinds. The third leg of the sector’s income is delivery are altered through co-production with what’s broadly been described as social investment— service users. A new social contract is developed”. new financial instruments, social banking, loans, However, the report concludes: “we are currently in social impact bonds. There is a variety, but that’s a danger of heading for the first, rather than the second relatively small part of the sector’s income, although scenario.” I wonder, Sir Stuart, whether you could say some people think it might be larger. a bit more about that and tell us what reaction you’ve had to this report. Q5 Chair: It’s what one might call social enterprise. Sir Stuart Etherington: Yes. Generally, the reaction Sir Stuart Etherington: Yes, exactly. It’s the sort of has been very positive. Perhaps I could outline why social investment funding of social enterprise activity. we came to commission this commission, as it were, and what we were trying to achieve. Q6 Chair: Would you put the foundation of mutual The story of the funding of the voluntary sector—the societies into that bracket? charitable sector—over the past 10 to 15 years is a Sir Stuart Etherington: Yes, I would, and their fairly simple one. The balance of funding has shifted financing is very, very different from the charitable from voluntary income to income from the state, and sector as a whole. Ev 2 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington

Q7 Chair: So it’s commercial in that it has to make of care in a particular county. Clearly we’re a very ends meet, and it is market orientated in that it will cheap provider, because we’re covering part of the generate its own income. cost. There are five charities providing end-of-life Sir Stuart Etherington: Yes. services in this particular county and we’ve now been told to bid blind to tell the state what the lowest Q8 Chair: But it will be for social purposes rather contribution is we’re prepared to take from the state than for profit. to allow our services to stay in the county. I think Sir Stuart Etherington: Absolutely right. It’s that’s close to greenmail, actually, but of course basically part of the wider civil society, which is, in a inevitably we’re the cheapest provider. Charities will sense, more similar to the commercial sector, although always be a cheaper provider if they’re subsidising, it applies its services for social good. and this is actually setting one charity off against another to drive prices down, so we’re in a very Q9 Chair: So coming back to the reaction to your vulnerable position. We feel an obligation to the report, how do you think we’re going to get to the public in that county, who give us money, so we can’t positive scenario rather than the negative one? possibly just walk away in the way that a private Sir Stuart Etherington: I think we have got to look sector provider can, so it’s a very dangerous time for at ways of driving up other sources of income other us. than the statutory income. That seems to me to be key to what’s going on. But also we have a major short- Q13 Chair: Sir Stuart, what can be done to measure term problem, which is that the cuts are beginning to the performance of local authorities in this area? bite on the voluntary sector as a whole. There’s a gap Maybe we could have a league table so that those who issue, I think, here, which is that Government are keen are cutting their charitable support the least and to encourage philanthropy and keen to encourage cutting their own overheads the most can be compared social investment, but charities that have a significant with those who are doing the reverse? Could the amount of public money being paid for them to NCVO do some analysis on this? deliver services are feeling the cuts pretty quickly. Sir Stuart Etherington: Yes, we’ve done some. It’s fairly anecdotal, because this is happening in real Q10 Chair: Mr Hughes-Hallett, is that your time, but I think it’s important that the umbrella experience as well? organisations—including NCVO plus the Office for Thomas Hughes-Hallett: Very much so. Civil Society and the Department for Communities and Local Government—get a handle on what’s going Q11 Chair: Could you give us some examples? on. There could be a clear recommendation that those Thomas Hughes-Hallett: Certainly. Marie Curie has Government Departments need to collaborate to get a an income of approximately £130 million a year, of picture of what is happening. which £30 million comes from Government and We have a lot of anecdotal evidence. For example, £100 million from the public. We see the Government we’ve seen Nottinghamshire County Council looking to charities to want to provide more services, announce its 58% budget cut to the voluntary sector, but of course many of us in the voluntary sector and Newcastle and Somerset similarly. Here is a provide services on not a full cost-recovery basis— classic example: Birmingham’s citizens advice bureau what we’re about is supporting the most vulnerable. has had the majority of its funding cut from At a time when the Government are making their own Birmingham City Council from 31 March and it’s cuts, as Sir Stuart rightly says, philanthropy itself is been told that it can rebid for a contract on 1 June. threatened. So the Government might be hoping that There won’t be a CAB to bid for that contract on 1 charities will come into this space, but they may not June—it’s highly unlikely. So there are a lot of be able to. The only way, I think, in which we’re unintelligent cuts taking place. There are a lot of very really going to be able to go into that space and fast cuts that are not seeing the joined-up nature of support the most vulnerable in society, who are now some of the things that are going on. I do think it’s having services removed from them, is if philanthropy important that we, together with the relevant is given encouragement and, if at all possible, the Government Departments, get a handle on the scale Government help that process with a lighter touch, not of this. At the moment there’s no systematic research least from the Treasury. being done on the scale of local authority cuts.

Q12 Chair: We will come to giving later on in the Q14 Chair: That sounds like an embryo conversation. I suppose the really big concern is that recommendation for us— central Government—and indeed local government— Sir Stuart Etherington: I would hope so, Chair. when they have to cut the cloth, tend to cut the discretionary areas of funding to third-party Q15 Robert Halfon: You said that they were organisations, rather than confront their own expenses unintelligent cuts. What would you describe as on their own balance sheet and, particularly, reducing intelligent cuts? their own employees. Is that your experience? Sir Stuart Etherington: I think I would say that you Thomas Hughes-Hallett: Absolutely correct. Of have to think in a number of different ways about this. course, the voluntary sector is a soft target in this One is it is important not to cut services that have a respect. If we use the Marie Curie example, at the demonstrable record in preventive services, because moment we’re talking to one of our very largest what you’re doing there is actually storing up more contract partners, where we provide about £500,000 problems for the future. Early intervention has been Public Administration Committee: Evidence Ev 3

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington demonstrated to work in a whole range of areas. If you Thomas Hughes-Hallett: Yes. We’ve spent £7 million cut those services, you’re likely to end up spending a as a charity researching this across 20% of the British damn sight more later on. So I think an unintelligent population. We’ve increased home deaths in cut would be to cut— Lincolnshire, for example, from 18% to 42%, and the consequence of that is the Government have now Q16 Robert Halfon: No, what is an intelligent cut? commissioned me to write an independent review of What’s the alternative? What would you cut instead? the funding of end-of-life care with the specific task Sir Stuart Etherington: I think you could cut a of stimulating the growth of community services. So number of areas where there’s no clear front-line I think it can be done, but it’s difficult. impact, for example. There probably is a range of cuts in bureaucracies that can be made, particularly within Q22 Robert Halfon: What is the response of the the public sector locally. Government when you suggest this? Thomas Hughes-Hallett: It’s quite an honest Q17 Chair: It’s easy to say it, Sir Stuart, but difficult response, which is that it’s obvious that it’s cheaper to to identify. care for people in the community, but to fund that Sir Stuart Etherington: Yes. we’re going to have to make cuts in hospitals. You can’t actually just send people out into the community Q18 Robert Halfon: Can you give me an example? unless the services exist. A lot of those are provided Give me an example of a cut that could take place by the voluntary sector, so that’s good news, as long instead in bureaucracy that would make a difference, as we retain our funding. meaning you therefore wouldn’t have to affect CABs. Sir Stuart Etherington: I think there probably are a Q23 Chair: But as we move to GP commissioning, range of cuts that could be made within the public wouldn’t it be cheaper for GP commissioners to service, and I would like to see much more money commission home help—home support for people in being spent on front-line organisations, for example, that situation—rather than to pay for hospital that are demonstrably working with the most admissions? Won’t there be a natural drive under the vulnerable groups. new NHS arrangements? Mr Walker: That means absolutely nothing. Thomas Hughes-Hallett: Clearly so, and hence why Chair: You’re sounding like a Minister. I’m so concerned that, in this phase, the commissioners don’t cut grants to the voluntary sector Q19 Mr Walker: You’ve come here and said that because it’s easier to see the voluntary sector lay off you want to see cuts made in public services. What staff than perhaps it is to make cuts in Government- cuts in the public sector do you want to see made employed staff. that you think are intelligent cuts? You have to have some specifics. Sir Stuart Etherington: With respect, I’ve not said Q24 Charlie Elphicke: I just wanted to get out there that I want to see cuts. What I’m saying is that I don’t that here there seems to be a duality underpinning the want to see cuts in front-line voluntary organisations work with the charitable sector at the moment. One that are dealing with the most vulnerable. the one hand you have county councils and suchlike doing commissioning of services. In that way, charity Q20 Mr Walker: We can’t have people coming here acts as a business like any other. I’m sure, Mr Hughes- to give evidence and saying, “We believe there’s lots Hallett, that when you were running your own bank of waste in the public sector and that’s where the cuts and building your great fortune and success, you should be.” Where in the public sector? That’s what would try and keep the legal and the accountants’ fees we want to know; where in the public sector do you down, like any other. Then there is the other side of think cuts should fall? charity work, which is what people consider they give Sir Stuart Etherington: I’m not sure that I’m fundraising for: the free services or free help that is qualified to say that. I don’t work in the public sector. given to people across civil society. I think there is an Thomas Hughes-Hallett: I’ll try to give you an important duality here that on the one hand charities example. It is a well-known fact that approximately act as businesses like broadly any other—you’re a two thirds of the British population would like to die care home provider in that sense to a county council— at home, with that home being either their own home and, on the other hand, services that are provided for or a care home. Only 25% achieve that. The vast the alleviation of poverty and suchlike are what the majority of people die in hospital. All the economic ordinary people in the street think that they are giving evidence shows that it is far cheaper for people to die to help. Would you agree with that? in the community, but there is a dramatic lack of 24/ Thomas Hughes-Hallett: Totally. Indeed, I think the 7 community services to support them. It’s quite clear sector has allowed itself to become too dependent on that investment in community services, matched by Government funding. I think the sector has allowed cuts in hospital services for those patients, would be itself to be seduced into thinking it should act more in the interest of patients, clinicians and the Treasury. like a business. I don’t subscribe to that view. I That’s an example. subscribe passionately to the view that we have become over-dependent on Government funding. Q21 Mr Walker: That’s a very good example. Have Some of the very largest charities are hardly charities you done anything with any organisation? any longer. Ev 4 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington

Q25 Mr Walker: Some of them are 85% public combination that often takes place. Different charities funded. will make different decisions about the balance of Thomas Hughes-Hallett: Absolutely. Is that really a that. I think the best charities combine the provision charity or is that an arm of Government? of direct services and the use of knowledge to influence policy. That’s the important principle I think. Q26 Robert Halfon: Do you agree with what Iain Duncan Smith has said? He’s called it the Q29 Chair: Just in passing, Sir Stuart, you’ve had a “Tescoisation” of the bigger charities—they’ve letter from the NOtoAV campaign— become so big that they’re indistinguishable from Sir Stuart Etherington: I have, yes. Government Departments. The Big Society really Chair:—after a number of charitable logos appeared means supporting the charities at the lowest— on the yes campaign website. A number of charities Thomas Hughes-Hallett: No, I think it’s a sweeping have responded and removed their logos, and I think generalisation. I’m a great fan of Iain Duncan Smith all the logos have now been taken down. The Charity and his work, but there are very large charities that Commission has now issued guidance that are almost entirely dependent on Government referendums should be treated in the same way as funding, and there are very large charities that are party elections. Do you have a response that you could almost entirely not dependent on Government put on record about this? funding. I worry desperately about this emphasis on Sir Stuart Etherington: Yes, we don’t take a view on small charities, because if you take health care and AV. We won’t express a view on AV, and we think it’s look at the contribution of Macmillan, Marie Curie, unfortunate that an organisation that we were part of CRUK and the British Heart Foundation—just four did that without informing any of us. organisations—between the four of us we commit up to £1 billion a year to support the health of the nation. Q30 Chair: This is the organisation called So I think it’s very dangerous to ignore the role played Democracy Matters? by very large charities that are not dependent on Sir Stuart Etherington: Correct, yes. We’ve asked for Government funding. our logo to be taken down; we don’t take a view in relation to that. I think the important principle in Q27 Charlie Elphicke: I think you raise an relation to political campaigning is that organisations absolutely perfect point. Those four charities you stick to their charitable objectives. mentioned are what I would categorise as good charities—charities that make a real difference. My Q31 Chair: But Democracy Matters itself is not a concern—I’ll put it to you and I’d be interested to charitable organisation is it? know what you think—is about charities that are what Sir Stuart Etherington: No, it isn’t. you might call campaigning charities: Shelter doesn’t provide any shelter; and the NSPCC seems more into Q32 Chair: And it’s obviously a political advertising campaigns these days than children’s campaigning organisation. Why are you associated homes, with Barnardo’s likewise. Is that a fair with this organisation? concern? Sir Stuart Etherington: Well, it isn’t a political Thomas Hughes-Hallett: I don’t think it is for me to campaigning organisation. comment, but I leave it to the Chief Executive of the National Council for Voluntary Organisations. Q33 Chair: Well, it obviously is. Sir Stuart Etherington: It clearly indicated that it Q28 Charlie Elphicke: Let me rephrase. Should supports a particular line on AV. As soon as we found there be more emphasis on charities providing—very out, we asked for our logo to be removed. much like what your own charity does—direct grassroots care and less on wider campaigning without Q34 Charlie Elphicke: Why are you a member? that getting into the grassroots? Sir Stuart Etherington: It was about assisting Robert Halfon: In essence, do some of the bigger organisations to develop their ability to campaign charities spend too much on advertising, corporate effectively, and we think intelligent campaigning is campaigning and so on? something that is part of the sector’s DNA. Chair: I think one question at a time, please. Thomas Hughes-Hallett: Well, I’ll try to deal with Q35 Charlie Elphicke: Just to take you back a few essentially both those issues. It seems to me that it’s moments, you said that free organisations should be a pretty fundamental principle that free organisations able to campaign and broadly do what they like. I and free associations can campaign—that’s important. have to bring you up short on that. They may be free I think there needs to be a balance between organisations, but not when they get the massive campaigning and service provision, and often charities taxpayer subsidy. That subsidy—the tax-free status will use their experience of providing services to and the return of tax or Gift Aid or such like—applies influence public policy. They will say, “Look, we because society takes a view that these organisations realise that caring for people with cancer requires a do things for the public benefit and are socially good. different approach, and we’re going to campaign to I put it to you again that that is better done by real ensure that different approach.” There wouldn’t be a action and actually helping people, rather than just hospice movement if there hadn’t been both the running round advertising and talking about it. provision of hospices by the charitable sector and also Sir Stuart Etherington: I think good charities do both. arguments on the need for more of them. It’s a I don’t think they can do anything in terms of Public Administration Committee: Evidence Ev 5

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington campaigning; they have to act within the law—within about supporting Marie Curie rather than other charity law—and the pursuit of campaigning activity charities, because the money that goes towards Rupert has to be directly related to their charitable objectives, Murdoch’s empire could instead go towards providing and I support that completely. The Charity care in the community. However, I think we have to Commission issues very clear guidelines in relation to accept that there has to be some advertising, but I am campaigning activity, and I would support charities very conscious that a handful of very large charities that comply with those guidelines. It’s very important. are now spending so much money on advertising that there is a risk that other charities are dragged up. Q36 Chair: How did 23 charities get it wrong? Barnardo’s and Marie Curie have talked about this a Sir Stuart Etherington: I think it’s not yet clear lot together in the context of other organisations that exactly what happened there, and I think we will look after children and people with cancer. clearly look in detail at that. But it was an organisation that was encouraging better and more effective Q40 Paul Flynn: Just following on from the point campaigning. I don’t know why it issued its support that Charles makes—one that I think we’re all for the AV campaign. As soon as we were aware of conscious of—is the situation with an area of charity that, we indicated our displeasure with that. such as homelessness in which the problem has decreased to a quarter of what it was in the past 10 Q37 Robert Halfon: Going back to charities and years or so. We used to see that the streets of political campaigning, when you look at charities’ London—areas around the Savoy Hotel—would be accounts on their websites, it is very difficult to see full of people who were sleeping overnight, and that’s how much they’re spending on political campaigning, gone. The number of people who are actually sleeping and yet you know they’re spending millions because under the stars has gone down to a tiny level. The they have public affairs officers and TV adverts, and number of charities has increased in that time, they send leaflets through the post that are political. however, as has the number of people working for For example, I have had leaflets sent to my house by them. Because they don’t have much work to do, they a charity called Christian Aid going on about Israel’s spend the money on advertising, which increases the alleged treatment of the Palestinians, and I thought it perception that the problem is larger than it is, and was totally out of order for the charity to do that. Do when the problem disappears, charities don’t go off you not agree that, to encourage giving, charities and work in areas that are necessary. should be much more transparent and say exactly—in I think that Charles rightly makes the point that there’s minute detail—what they spend their money on? a great deal of cynicism there. Who decides which Givers can then go on to their websites and say, “This charity is the worthy one? Is it done by clever charity is spending 20% of its budget on political advertising? There used to be a very expensive advert campaigning. I don’t want to give my money to them; at Westminster station with a picture of the Chamber I’d rather give my money to the Marie Curie, which of the House of Commons—it was a Shelter advert. It is doing a fantastic job with people suffering.” is like the charities whose objects disappear continue. Sir Stuart Etherington: I agree, Mr Halfon. I think We had one quoted to us by the Charity Commission charities should be transparent in reporting what they when it was clearing out the charity. There is one in spend on which particular activities. I do agree. Wales that exists to provide petticoats for fallen women. Now, there isn’t a great call for petticoats Q38 Robert Halfon: And does the NCVO or the these days, and either there are no fallen women or Charities Foundation have any power to enforce perhaps everyone is a fallen woman—things have guidelines, or is that up to the Government? changed. But that charity exists, so it can only give Sir Stuart Etherington: It’s up to the regulator. It is money to that particular cause. up to the Charity Commission to make sure its Chair: Can I press you to ask a question? guidelines on campaigning are enforced. It’s political, Paul Flynn: Indeed, yes. Sorry. Where can we be but no charities should take party political stances— guided by what is the worthy charity? Is it determined that’s quite clear. by the amount of spending they do, which increases that false perception, or should, say, the Charity Q39 Robert Halfon: That’s very different though. A Commission, which has had a huge cut, be responsible party political stance is fairly easy to define, but to for adjudicating when charities are over-providing in take the Israeli example I mentioned, you can have a areas where the need has disappeared? view either way, but that was clearly political activity Thomas Hughes-Hallett: We’re one of the lower that had very little to do with fundraising and more to spenders per pound of size in advertising—we’re not do with the political stance of that organisation. great friends of the advertising industry—and our Sir Stuart Etherington: I think charities should report growth has been very significant. I don’t see a what they’re spending on different types of activity, tremendous link. I think it’s slightly caveat donor, and yes. I think that’s beginning to pay off. I think donors are Thomas Hughes-Hallett: I was just going to say in getting tired of seeing full-page advertisements in response to Charlie Elphicke’s question that I have newspapers day in, day out, from some very large very real concerns about the level of spending on charities when they’re not quite sure what they do. advertising by some of the largest charities, and every I’ve always taken the view that the public will catch time I open a colour supplement or a newspaper and you out eventually. There’s clearly still a see a full page from a charity, it pains me greatly. I misapprehension about what some charities do. Some exploit it mercilessly by talking to potential donors people give significant sums to charities when they Ev 6 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington don’t really know what they do, but they associate Q46 Chair: Isn’t there a danger for some charities? with the brand name that’s been around for decades Marie Curie very courageously differentiates itself and decades, and at the end of the day philanthropy is from some of its peer group. Isn’t there a case for not a very scientific business. Most of it is emotionally charities themselves marketing more aggressively driven. I know that myself—it is emotion that mainly what they do and basically identifying a list of the leads me to give. worst offenders? Sir Stuart Etherington: I think there’s a case for Q41 Robert Halfon: It’s not just paper advertising; organisations in the charitable sector to assist charities it’s TV advertising, which is constant all day, but in measuring the impact of what they do in terms of particularly on daytime TV. Just going back to the services, and over the past five years there has been political campaigning thing—to give you another increased activity in helping organisations to do that. example—Shelter regularly send press releases to my New Philanthropy Capital, for example, does that. local newspaper with a particular stance about the coalition Government’s activities. Now you may Q47 Chair: But would you recommend that the disagree or agree on the coalition Government, but regulator toughens up the rules? that is clearly political activity, and the local paper Sir Stuart Etherington: I would recommend that the then prints that press release, and because it’s from a regulator enforces the rules effectively. Nothing in charity—Shelter—it’s regarded as the word of the the rules— gospel, and it’s very difficult for any politician of either side of the argument to argue against it. Surely Q48 Chair: So they’re not enforced effectively at the job of Shelter should be to provide homeless the moment? people with homes, not send out political press Sir Stuart Etherington: I think they are effectively releases that are nakedly political in terminology and enforced in relation to political campaigning, yes, but very difficult to argue against. you would have to ask the regulator that. Sir Stuart Etherington: I think it’s the job of charities to do two things. One is to provide services for those Q49 Chair: But then you are saying that nothing in need, and I think that’s an important component in will change? what they do. The other is to point out—I think in a Sir Stuart Etherington: I think that provided charities non-partisan way—the potential detrimental effects of act within the law in relation to campaigning, they public policy decisions that impact on their should have the right to do so. constituency, and I think that is an important Thomas Hughes-Hallett: But I think we have to be component of what they do. very careful about this, Chair, because there’s campaigning and campaigning, isn’t there? There’s Q42 Charlie Elphicke: Do you not regret that waffle campaigning, if I may use that phrase, but last Shelter does not provide services—any services—to week this Government published its new cancer those in need? strategy, with £750 million of new money. All that Sir Stuart Etherington: It provides quite a lot of money—every penny of it—has been aimed at advice services, I think. survivors. There is not one penny for terminally ill patients. Would you rather that I, as Chief Executive Charlie Elphicke: Advice? of Marie Curie, which looks after 55% of cancer Sir Stuart Etherington: Advice and information. patients who die at home, don’t hold Lansley’s feet to the fire and say, “Hang on”? Would you describe that Q43 Charlie Elphicke: What about actually helping as political campaigning, or would you describe that homeless people? as the job that I should be doing as Chief Executive Sir Stuart Etherington: There are a variety of other of the charity representing the 600,000 people who homeless charities that do that, and I’m not familiar are going to die this year? with the exact nature of the services that they provide. Q50 Chair: So we need to be aware that we’re Q44 Chair: Can I just finish off this subject—we’ve dealing with shades of grey here? spent a lot of time on it and it wasn’t on our brief this Thomas Hughes-Hallett: I think so. There’s political morning, but nevertheless it’s very important? Who and then, frankly, there’s holding Government to should be responsible for measuring whether charities account, irrespective of its political colour. are actually involved with charitable activities Charlie Elphicke: You can do that because you have sufficiently, or are becoming over-involved with the credibility to do that because you actually provide campaigning activities? Who should be responsible? services. What we’re criticising here are charities who Sir Stuart Etherington: Ultimately the regulator. provide no services and just live off the fat of the land, Ultimately the Charity Commission. and that’s just not acceptable. Robert Halfon: My argument is that while I have no Q45 Chair: But is there a case for an organisation problem with what Shelter does, it should be classed such as NCVO—a non-governmental organisation— as a pressure group, just as the TaxPayers Alliance is taking a guideline view and highlighting some of the a pressure group. worst offenders? Isn’t there a case for the charity Mr Walker: I just think that, perhaps, you might like sector to regulate itself? to reflect on the fact that the charitable sector’s got Sir Stuart Etherington: I think it is a job for the itself in a little bit of a pickle over the last 10 or 15 regulator because it relates to charity law. years. Despite the impression I give to you, Sir Stuart, Public Administration Committee: Evidence Ev 7

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington

I’m quite mild mannered, but I am just so bored of in Cornwall? Yes, much. We could give access; we being lobbied—not by Chief Executives of charities, could be the gatekeeper. But the reality of life is that who are now far too important to come and see mere will be tearing up £30 million of funding for end-of- humble Members of Parliament, but by parliamentary life care patients in Britain, and I’m not sure that’s in campaigns officers who, in most cases, have the interest of patients. I think it’s a nightmare absolutely nothing of interest to tell me. They’re conundrum, but the Government are clearly now making work for themselves, ticking boxes, sending encouraging charities to become one of the “any impersonal e-mails and sending letters on behalf of willing providers”, and I think charities need to be their Chief Executives with electronic signatures. I very careful about being seduced into accepting that cannot recall ever sending a letter with an electronic on the basis of full cost recovery. signature to any of my constituents. I think that charities need to reflect on their own behaviour, and Q55 Chair: My last question on this topic. Isn’t there if they’re feeling under pressure from politicians, they a danger—it’s another danger that’s been highlighted should ask themselves why they’re coming under by the Centre for Social Justice—that charities almost pressure from politicians. I think some of your become nationalised by stealth, because they become members, as my colleagues have highlighted, are subject to the targets the public sector puts on them, straying into dangerous waters at the moment. and so a good new charity that seems to have the Robert Halfon: And— initiative in a particular social sector finishes up just Chair: Mr Halfon, you’re beginning to try my being a branch of local or central Government? patience, but carry on. Thomas Hughes-Hallett: I think the trustees, as opposed to the executive, of charities need to be very Q51 Robert Halfon: Not for the first time. alert to this and control their executive from rushing Given what Charles has just said, I would say that at to bid for contracts on a willy-nilly basis. least 20% of the 150 to 200 e-mails a day I get Chair: So, moving on to giving. nowadays are from charities, and they’re not personal e-mails—they’re ones produced when people put their Q56 Paul Flynn: How do we persuade rich people name and a postcode on their charity’s computer and to give? I presume they don’t give because that’s the you get an automated e-mail. Surely that is a very way they became rich in the first place. It does seem ineffective way of lobbying MPs? extraordinary that poor people are three times more Sir Stuart Etherington: I think it is bad campaigning. likely to give to charity than rich people. Why is this? Thomas Hughes-Hallett: This is my pet subject, so Q52 Robert Halfon: But every charity group does it. I’m very glad you’ve asked me. You may know, Thomas Hughes-Hallett: If you return to your file, although perhaps you don’t, that I’ve recently you’ll find there’s a letter from me. Smudge it with launched an independent review into philanthropy in your finger and you’ll find it smudges. Britain with partly exactly this—but it is a big part— as the aim. I share your frustration. I’ve been Q53 Chair: To move on, before we come to the extremely fortunate in life and I have chosen to try question of giving, let us turn to the question of and make my children slightly nicer by giving as commissioning of public services. Isn’t there a danger much as I possibly can away before I die. I think the of a conflict of interest developing in charities when answer to your question is complex, but I think there they become too engaged with contracting for services are some very simple things that can be done. to local authorities or to Government? Don’t they begin to be diverted from their charitable objects and Q57 Chair: But is it true that rich people don’t give? just become a Government contractor? Thomas Hughes-Hallett: No, clearly not. There are Sir Stuart Etherington: The mix in different charities some extraordinary generous people in this country, of the level of public funding is quite variable. and indeed a very substantial part of the giving in this Organisations that are highly dependent on public country comes from very few people. However, more money have, I think, become so over a period of 10, worryingly, a very large number of people who could 15 or 20 years as those contracts have been available. afford to give don’t. That’s a huge opportunity for us I think if they’re pursuing their charitable objectives as a sector. in providing those services, they would see that as quite legitimate. I think there is a danger of over- Q58 Chair: But our brief tells us that 8% of the dependency on public finances, and what we’re seeing population contributes 47% of total charitable now is, to a certain extent, the consequence of that. contributions, though wealthy people tend to give a smaller proportion of their income. Q54 Chair: Mr Hughes-Hallett? You look troubled. Thomas Hughes-Hallett: I think that’s true as well. Thomas Hughes-Hallett: I think that is the $60,000 But I think there are some changes that we can make, question that keeps me awake every night. The reality and I think there are some that this House can help us is, if you take Cornwall, there are no out-of-hours end with. It is very notable in the giving Green Paper that of life services in Cornwall except for Marie Curie. was published, interestingly, between Christmas and Yes, we receive some funding from the Government New Year—which was a pity for those of us in the to help to allow us to pursue those services. We’ve sector; it would have been good to have it in just been put on notice, actually, so it’ll be very mainstream time—there was no mention of any interesting to see what’s going to happen in Cornwall commitment from the Treasury in a review of giving. now. Would I rather just be providing a free service It seems quite extraordinary that a Green Paper should Ev 8 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington go out without any comment from within Government I think that we ourselves, as an industry—if I may use as to whether the Treasury is going to look at some that word on this particular occasion—really need to advantages that might be made available for giving. get our act together on working out how to ask people Let me give a very simple example: we are planning for more. I think we’re a bit shy. So, in answer to your to do an event this summer that will raise a very question, I think there’s a bit about charities where substantial sum for end-of-life care nursing across we’re a bit shy about asking for large amounts from Britain, and it’s going to be based on art. If you were very busy people—it is quite scary, by the way—but, to wish to donate from the House of Commons that secondly, I think there’s a lot that can be done in terms fine picture to Marie Curie to help fund nursing—and of recognition and culture. That is the final point, you might take the view it’s been around there a long which is longer term, around education and time and you’re quite bored of it, and rather than it encouraging giving circles. We have all these high sitting on the wall you might like it to be sold to fund sheriffs dotted around the country. Why don’t high Marie Curie nursing—before you could give it to me, sheriffs call together giving circles in their counties or as a British citizen, you will have to pay capital gains towns and talk about giving, without beastly tax. So it’s on your wall and it’s not earning any fundraisers present asking them for money? money for anyone, including the Treasury, but if you wanted to give it to me, you will have to pay capital Q61 Chair: I think they do, don’t they? gains tax, so, guess what, you’re going to leave it on Thomas Hughes-Hallett: Well, it doesn’t seem to your wall and it will sit there for generations to come. have achieved very much. So there are some very simple things that can be done around fiscal reform that I think would help Q62 Paul Flynn: The Government have come in enormously. 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 Q59 Chair: Does the same apply to shares? failures recently. There was the Heyday introduced by Thomas Hughes-Hallett: No, so bizarrely you can Age Concern, where it lost £40 million on a very give me shares and offset that against tax, but if you ambitious idea that collapsed. We’ve seen the way of give me your house or your art, you can’t—in fact, collecting money in the streets by persuading people you’re sort of taxed to do it. There are some to sign up after pulling at the heartstrings with some idiosyncrasies that I think the Treasury needs to look story of a charity. People sign up, but now that those at urgently. who were foolish enough to do this realise that their Secondly, I think there’s a subject around recognition. contributions for the first 18 months go to the person One of the very most generous people in this country who persuaded them to sign anyway, and very little was honoured in the most recent honours list in the actually ends up with the charity, I think that’s been thoroughly discredited. We’re told that in America the diplomatic section for services to Anglo-Israeli successful system is through the tax system. That relationships. This is a man1 who gives £7 million appears to work. I think we all have experienced that away a year, but he didn’t appear under philanthropy. if it becomes known that someone is giving to charity, We actually counted the number of people who they become a soft touch and we become inundated appeared under philanthropy—there are almost none. with requests. Those who donate in the streets find Vernon Ellis received a knighthood partly for service that their names are sold to other charities. What is to arts, but also he’s been an extraordinarily generous the best way in the future, having seen these failures, man. So I challenged the honours office and actually of increasing giving? there isn’t a category for philanthropy. Thomas Hughes-Hallett: Can I make two comments Chair: How extraordinary. That’s astonishing. and then pass over to Sir Stuart? I have a very strong Thomas Hughes-Hallett: You have to do view about Heyday, which is that it’s become philanthropy and service to local communities. So if fashionable to encourage charities to look at setting you’re a very rich, very busy man and you write out up social enterprises to make money. I’m afraid I’m a a cheque for £50 million, that’s not enough—you’ve Luddite on this—I think it’s a disaster. I don’t think got to go and paint a bus shelter for 14 weeks as well charities have the right management teams to run as punishment. So I think there’s something around businesses; they have the right management teams to recognition that could be done. run charities.

Q60 Chair: Of course, it’s not been unknown for Q63 Chair: What about Emmaus? generosity to political parties to have an effect— Thomas Hughes-Hallett: I can’t comment on that. Thomas Hughes-Hallett: Chair, I leave you to say Chair: It does this very successfully. That is its that. charitable model. Chair: In the past, of course. Thomas Hughes-Hallett: But what business does it Thomas Hughes-Hallett: I leave you to say that, and run? I’m not sure, as the Green Paper recommends, with Chair: It runs hostels for homeless people. great respect to Nick Hurd, that a letter from the Thomas Hughes-Hallett: I think that’s different. I Minister will quite do the trick. The suggestion in the have been told of a hospice that’s just set up a Green Paper is that generous donors get letters from brewery—that’s what I’m talking about. In terms of Ministers. So I think something around recognition. chugging, as it’s called, I must correct you on that, 1 Note from witness: Correction—man who comes from a with respect. Not all charities that are doing on-street family that gives several million pounds away a year. collections give commission. Marie Curie collects on Public Administration Committee: Evidence Ev 9

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington the streets widely. We pay none of those nice people Q66 Lindsay Roy: Can you explain how exactly you who come up to you wearing a daffodil a penny of would like to see this modernised and reformed? commission, and it’s an extremely efficient way of Sir Stuart Etherington: Well, at the moment it’s a fundraising. It’s one of the ways of fundraising with paper-based system, so the people go in, they fill out the highest return on investment. The public doesn’t the piece of paper, it goes to HMRC, and the charity like it very much, and by the way, if you’ve been is reimbursed for the money. Much more could be approached—with great respect to you and to me—it done electronically, so that the charities could post the would mean that the person approaching you thinks signed form—I think the person says, “I am a you’re under 40, so you should be extremely flattered taxpayer and I want this to be treated as Gift Aid”— by it, because their target audience is 40 and under, and the Revenue could do that automatically. Charities and no one ever approaches me. Aid Foundation has done a lot of work in relation to this, and I’m sure it would be happy to provide you Q64 Paul Flynn: I’m pretty struck by what you said with additional information about how it could be about the fact that Governments and society in general achieved. measure the effectiveness of help for those who are terminally ill by the number of weeks and days that Q67 Lindsay Roy: There’s no reference to this in the they live, rather than measuring it by what we all Green Paper. Have you made any representations on want: a good death surrounded by our loved ones. that basis? Also, most people would regard having a choice of Sir Stuart Etherington: Yes we have, and HMRC the time of death as being desirable too. By every says that it can’t afford to do it, so there is a problem measure of public opinion, most people would opt for in relation to its ability to update its systems. euthanasia. How can we do something with the way the drugs are sold? It’s all about the time you survive, Q68 Lindsay Roy: Would the argument not be, in not the dignity of the death or the damage these drugs terms of our current position, that we can’t afford not will do and so on, but that’s the only measure. Do you to do it? see it as a core activity of your charity to ensure that Sir Stuart Etherington: I think it should do it, and I those attitudes, which most people feel, are reflected think it should do it fairly quickly, but at the moment in Government policy? it is saying it can’t, and we’re still continuing the Thomas Hughes-Hallett: I think there’s good news pressure on Government in relation to this. on that. I’m pleased to say it is not through expensive political campaigning—we have one junior policy Q69 Lindsay Roy: It does seem to be a major officer, who is 30 and a very able young lady—but inhibitor to a key Government objective. that commitment appeared in the manifestos of all Sir Stuart Etherington: It is. three main English political parties. Q70 Chair: But couldn’t credit card companies be persuaded to store our national insurance number on Q65 Robert Halfon: I would like to ask two our credit cards so that when we give through a credit questions, please. First of all, I accept the recognition card, the charity automatically gets our national argument, which is incredibly important. The insurance number and can extract the Gift Aid? downside, of course, is that people will then say it is Sir Stuart Etherington: It’s an interesting idea. cash for OBEs—you give your £50 million, you get HMRC has to see it, though. your OBE. I just wondered how you can answer that problem, before I come on to my second question. Q71 Chair: HMRC will see it when it sees the credit Thomas Hughes-Hallett: Well, I think it is honours card transaction has taken place and your national at every level; that's the answer. insurance number— Sir Stuart Etherington: It’s the point about public Sir Stuart Etherington: That’s an interesting idea, recognition. Unlike the United States, there doesn’t Chair, yes. seem to be the same level of public recognition for Thomas Hughes-Hallett: One of the things we’re people who give large gifts, and I think there should looking at in our review is that it is slightly odd that be. Whether you do it through the honours system or CAF is the only charitable bank account. Of course, I there is another way of doing it, I’m not sure, but I think I’m right in saying you can produce your CAF think we need to give that. Just covering the point documentation for Gift Aid purposes. about effective giving, clearly the most effective way Sir Stuart Etherington: Yes. of giving is giving regularly and using Gift Aid. The Thomas Hughes-Hallett: One of the things we’re biggest change, I think, has been the introduction of likely to recommend is that the Government Gift Aid, which was by a Conservative Government, encourage all the major banks to set up charitable and dropping the Gift Aid threshold under the last bank accounts for individuals that can then be used as Government from £250 to zero, so any traceable evidence to HMRC of their charitable giving—first donation by a taxpayer can now get Gift Aid relief. for tax reasons, but secondly because I believe firmly Many charities still don’t use Gift Aid, so I think they that if people have a charity bank account, they will could use it more, and the system is quite cumbersome actually spend it. and is still paper-based. One of the things that we and Charities Aid Foundation have argued for is for the Q72 Robert Halfon: I went to a recent meeting modernisation of the Gift Aid system, because that where I was told that senior members of the American would make a big impact on charitable giving. National Football League—the main players—all Ev 10 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington have their own individual charitable foundations, and Sport Relief, it’s every year. Good for them. Actually, you can’t say the same of very many footballers here. I think it’s a great organisation that supports all sorts What is it about America that makes charitable giving of fantastic causes, but it’s pretty painful watching all so much higher and that makes rich people give so that lovely free television time that I’m funding. much more? Is it because they pay lower taxes, or are there other cultural reasons? Q75 Robert Halfon: For all these special days, who Sir Stuart Etherington: It’s a really difficult question decides which charities are going to be supported? to answer. There is a different tax regime in the United Sir Stuart Etherington: They have foundations States, but also I think that expectations of the state attached to them, so Red Nose Day will provide are different: there might be a relationship between information to the foundation. Both Children in Need levels of charitable giving and your expectation of and Red Nose Day—Comic Relief—have what you’re buying through your tax, as it were. foundations. Those foundations have trustees, and There’s no empirical evidence for that, but it would they make decisions on how to dispense the money. seem to be a reasonably safe assumption that if you thought that you were actually paying for services Q76 Robert Halfon: And do you lobby to be on Red through your tax bill, as it were, you might be less Nose Day, or whatever it might be inclined to give to charities that are providing services Thomas Hughes-Hallett: I don’t think the public likes as well. There’s no empirical evidence for that, as I charities to be seen to be fighting among themselves, say, but it seems to me to be reasonable to assume so it would have to be done very carefully, and not that that’s true. least as Comic Relief is a fantastic organisation. Chair: That’s why political parties are so unpopular. Q73 Robert Halfon: What you’ve said is a profound Thomas Hughes-Hallett: The simple answer to your philosophical point. You’re saying the smaller the question is I would love Comic Relief to make state, the bigger the charitable giving. significant donations to Marie Curie, given the money Sir Stuart Etherington: It’s an interesting point. It that’s probably being taken away from us by its might well be true, of course. I certainly think that the presence on TV. Big Society agenda is based in part on that assumption. Q77 Robert Halfon: A huge proportion of Thomas Hughes-Hallett: It’s worth remembering that individuals’ money goes into these things because, as although the Americans are held out as more generous you said, of the huge coverage and the celebrity than us, the great majority of that generosity goes linkage, and it seems a very undemocratic way to towards their church and to their schools. They’re decide how money is being given to charities. absolutely astonished that we give so much money to Shouldn’t there be a different way—a vote from the animals—they just can’t get it—but I think I’m right public, for example, on which charities should be in saying that about 50% of their giving is either to supported on these special days? church or to school, which actually does mean it’s Sir Stuart Etherington: I think that The Lottery has absolutely in their culture, because from day one the experimented with the public saying where they want children are used to the school they’re going to being the money to go to. There could, I suppose, be more funded by their parents and the church that they attend engagement with the public to determine how money being funded by their parents. is allocated through these types of event. Comic Relief Sir Stuart Etherington: And Tom makes a good tends to give to smaller organisations that don’t have point: another potential motivator for giving is, fundraising capacity themselves, so there is a sort of obviously, religion. There is actually a close adjustment going on there. But I don’t see any reason correlation between religious belief and charitable why it shouldn’t take cognisance of public polling or giving and the giving of time, and as we’ve become some other way of identifying what the public thinks more secular, that may well have had an impact on is particularly beneficial, given the fact that it has had charitable giving. very public fundraising from the media. Chair: I’m aware that Mr Heyes hasn’t asked a Q74 Robert Halfon: Are Comic Relief and Red question yet, so do chip in when you want to. Nose Day-type days detrimental or positive in a sense? I don’t know how the charities are selected that Q78 Charlie Elphicke: When I speak to people who people give to on those days, but does it take money are quite wealthy and the subject of giving and the away from lots of the other charities? I don’t know if impediments to giving come up, the same kind of Marie Curie’s ever been on Red Nose Day. themes often emerge: first, that a lot of charities have Thomas Hughes-Hallett: Well, it’s a very interesting turned into massive bureaucracies that don’t actually question you ask. May I answer it? The Red Nose help people, which we touched on earlier; and, Day campaign happens smack in the middle of the secondly, the concern that there is almost a Daffodil Campaign, and there’s something in me that quangocracy of charities whereby charities have large doesn’t want to be mealy-mouthed but Marie Curie bureaucracies of people who are highly paid. Some can’t benefit from Comic Relief, unfortunately, a) Chief Executives earn £120,000, and some even more, because of its criteria, and b) there’s something about and people think, “Well, that’s not really volunteering; all that coverage they get on a television channel that’s that’s like an industry and a business. Why should we funded by taxpayers that Marie Curie would dearly give to that?” What is your reaction to that? love to have, too. So, yes, it does hurt us, there’s no Sir Stuart Etherington: I think it depends on the question. It used to be every other year—now, with nature of the charity. If you’re running a major service Public Administration Committee: Evidence Ev 11

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington operation that’s actually providing very skilled care to relationship between tax and giving is complex. If the very vulnerable people, as Tom is, for example, I operation of the Gift Aid scheme was more effective, don’t think you can underpay the executives. They’re I think that we would see more giving. often trying to do very skilful jobs. I think charities have to do the job of explaining exactly what they’re Q84 Chair: But if more and more of the nation’s doing and exactly what they’re spending on what, and wealth is simply taken by the state, that leaves a I think we would encourage charities to be transparent smaller and smaller pot for the charities to fundraise in saying what they’re spending on what and why from. they’re doing it. Sir Stuart Etherington: It’s a testable proposition, isn’t it, whether tax rates and giving are related? Q79 Charlie Elphicke: Correct me if I’m wrong, but There’s not a lot of evidence in the UK that when we you’re the Chief Executive of the National Council had lower tax rates giving was profoundly increased for Voluntary Organisations, so don’t you think you as a result, so I’m not quite sure that there’s a straight should be taking the lead in encouraging more relationship between those two things. volunteering and encouraging more people to give Thomas Hughes-Hallett: I think, Chair, that this is a voluntary time, rather than justifying why charity fat really important issue. The coalition Government are cats should have massive pay packets like they’re hoping, in this world of Big Society, that charities will some kind of bankers? fill the gap that has been left as public sector cuts Sir Stuart Etherington: I would encourage people to take place. For the first time since 1948, some very give up their time voluntarily, but I don’t think those vulnerable people will no longer have the safety nets two are mutually incompatible. If you’re running an that they are used to the state providing. We must organisation that is providing quite complex services, replace those safety nets, and the only people who you do need to pay the executives of those actually can do it are charities. And it’s at this organisations. moment—more than at any other time in the last 63 years—that the Treasury has got to help charities by Q80 Charlie Elphicke: Take the case of your making it easier and more desirable for people to give, organisation. Is it not the case that you’ve recently because otherwise some of the most vulnerable people made redundancies, yet you have six people who earn in our society are going to start falling through, and over £80,000 a year? Did any of those take pay cuts I’m really, really worried about it. I think the Big when those redundancies were made? Is everyone all Society is a fine idea, and emphasising that society in it together? can play a bigger role is a fine idea. But at the end of Sir Stuart Etherington: We’ve had a pay freeze now the day, even if we get volunteering increasing for three years. dramatically, nothing can work properly without additional funding, and we’ve got to get it—not from Q81 Charlie Elphicke: Touching on the issue about Government, we know that. I believe the public want encouraging more giving, it seems to me that a lot of to give and will give, and we need to encourage them people are concerned about the Charity Commission to do it. being a paper tiger. I haven’t heard anything today that provides leadership from you as to how charities Q85 Chair: So you’d be quite keen for us to have a can get their house in order and be more proactive Treasury Minister as well as the Minister from the about what they’re doing. Do you not think that you Cabinet Office? and the Charity Commission have a dual and joint role Thomas Hughes-Hallett: You might remark that it to improve practice in the industry? would be odd not to. Sir Stuart Etherington: The majority of the money Charlie Elphicke: Do you also think that we should that NCVO spends is actually spent on providing have an adjustment so that we call for a change of advice and information services to improve their regulation in our report to encourage more charities performance, and that would be across a range of like yours that do things and discourage charities that issues. We focus on good governance, the provision don’t do anything in these difficult times so that we of information about funding opportunities, and ensure that there is a focus on the vulnerable? looking at the recruitment and retention of volunteers. Chair: I think we’ve already covered that point. The bulk of our work is providing advice and information to organisations about how they can Q86 Paul Flynn: How does the Treasury ensure that improve their performance, and that’s a very there is increased giving from the public? important function of NCVO. Thomas Hughes-Hallett: That’s always been the block in the past. The Treasury has always said two Q82 Chair: So do you think you’ll achieve your things before: first, “Unless you can prove it, we 2020 target of increasing charitable giving to £20 won’t do it”; and secondly, “England is different from billion a year? America.” I have a lot of sympathy with the first point Sir Stuart Etherington: I certainly hope so, and I and little with the second. If things have been proven think it is possible. to work in the United States, I think the Treasury should at least consider them—that’s all I’m saying. I Q83 Chair: And do you think that can be done if think it’s fair to say that the announcement from the taxation goes on rising? Treasury has been that there should be a further Sir Stuart Etherington: That’s a very interesting review of Gift Aid, and we’ve had so many reviews question. I think the evidence would be that the of Gift Aid. Ev 12 Public Administration Committee: Evidence

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Sir Stuart Etherington: It really is important that we with Goldman Sachs. A foundation setting up a get Gift Aid right. It is a cumbersome system and if system for providing immunisation for people you recommended nothing else, it would be to overseas did not have enough money to do it all in improve the effectiveness of Gift Aid, and I think that one year and was going to spread it over five years, should be a serious question to the Treasury. which meant that people would die during that time. Goldman Sachs capitalised that and enabled it to do Q87 Chair: This is a very important aspect of the that in one year, so it was applying its own skill set Big Society. to enable something to happen. Danone has done Sir Stuart Etherington: It is. As Tom says, if you something similar with yoghurt manufacturing and want to change the balance between the state—and distribution in India, for example, so there are the expectation is that if you have a smaller state, examples of where companies have applied their own you’ll have a bigger charitable sector and a bigger skill set. voluntary sector—you have to put in place clear policies to encourage that to happen. At the moment, Q92 Paul Flynn: But isn’t the Big Society a big con? not only is there a gap as public spending is reducing Everyone’s in favour of this woolly concept in the and the slack’s not being taken up, but, I think, there same way that they were in favour of motherhood and are one or two simple things that could be done by thornless roses. But the Government have made a the Treasury to improve the situation, the principal massive cut, and we know it’s going to affect those one of which is to improve the Gift Aid structure. who are the beneficiaries of the good charities. In order to window dress it, they have put forward this Q88 Chair: What about corporate giving? concept of the Big Society in the way of selling it. We Sir Stuart Etherington: It’s quite low as a proportion hear that they want to nationalise people’s good will. in the sector. I think it’s less than 2% of the sector’s It’s mentioned that there’s someone in every street total income. There are two things that I think could who goes round and helps elderly people out, gives happen in relation to corporate involvement with the them a lift, digs them out when the snow comes down. sector. One is that there needs to be much more The good Samaritans are suddenly going to become brokerage between the corporate sector and the part of a national force—a national citizen service, voluntary sector, particularly at local level, where it would you believe?—and anyone of my generation doesn’t happen, or hardly at all. feels a chill of fear when there is mention of bringing back national service. The idea that the Government Q89 Chair: What do you mean by brokerage? are going to take credit, or are seeking to take credit, Sir Stuart Etherington: I mean people who are for what people do out of the goodness of their hearts responsible in the voluntary sector and the corporate is not going to work. We’re still going to see these sector for ensuring that relationships develop, massive cuts, although there is not really any sincerity particularly at a local level. Actually, there’s much about them. The Government will still go on spending more outgoing work between the two sectors. wildly on the things that Governments want to spend on: fighting wars and building weapons of mass Q90 Chair: But what does that mean if you’re a destruction. There is a huge increase in the prices of corporation in the Home Counties—for example my Essex constituency—employing a few hundred people food products, but there is no question of any cuts to or a few thousand people? What does that actually farming subsidies. Governments will do what they mean you need? want to do. The cuts will wound deep and they will Sir Stuart Etherington: Well, you can get to know have a serious impact of charities’ funding, and no your voluntary sector locally, you get to know what it amount of Big Society propaganda will help to soften needs, and you can talk to charities locally about what the blow. Isn’t that right? they can do. You can begin to involve employee Thomas Hughes-Hallett: Just on the Big Society, I volunteering schemes; you can do matched funding. 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 Q91 Chair: What is the incentive for a corporation that at least it makes people talk about it. But more to do that? importantly than that, I think that the Government can Sir Stuart Etherington: The argument would be, I lead from the front here. Three years ago, Tesco think, that healthy back streets make healthy high supported Marie Curie. It got the whole workforce streets. Assisting your local community and engaging behind us and raised £6.5 million for Marie Curie. people in your local community improves the quality The Government are the largest employer in this of your own work force. It improves the way in which company. I would love to be the NHS’s charity of the people think the company is doing something good year, but there is no such category. I believe that for its community, and so they have more of an public servants and public service now need to lead affinity with their company. It also, I think, establishes the way in supporting charities and providing brand reputation for companies, and I think that is volunteering programmes. There is actually some quite important. Many companies do give, and I think encouraging stuff in the Green Paper about that, but I they could do a lot more. One of the more recent think that the Government really needs to be held to developments in what is called corporate social account on this. And the other area that I think would responsibility is for companies to think about their be hugely helpful would be if charities worked very skill set, and how that skill set can be applied. It isn’t closely with unions and their huge memberships, just painting village halls. There was a recent example again in terms of working together to see how we can Public Administration Committee: Evidence Ev 13

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fill the gap that is emerging. I’ve started talking to training, whether they were doing care, or whether Unison in that respect. they were doing health services. Secondly, we looked at the proportion of public spending in those Q93 Charlie Elphicke: Do you think that trade categories, and then, thirdly, we looked at the level unions should do that with their membership as well of assets that those organisations had. This was all by having more corporate social responsibility and aggregate analysis; we couldn’t do individual encouraging payroll giving? charities, but we looked at those industries and we Thomas Hughes-Hallett: Absolutely. I think all communicated the vulnerable areas. The vulnerable employers should, but not just unions. I think all areas are employment and training, because mainly employers. Payroll giving has been a massive failure. it’s done under contract to the Government—it is It’s something we’ve got wrong for charity. about 90% Government funded—and because it’s tight contracts, they’ve never had the ability to Q94 Robert Halfon: It’s harder for the NHS. The develop reserves, so they have no assets. So they’re hospitals within the NHS often have their own very vulnerable to policy changes, and that is why charitable fundraising activities to pay for a new you’ll see a lot of employment organisations under dialysis machine, so that tends to be where the threat at the moment. Advice services—Citizens charitable activities focus. It’s very hard for them to Advice and advice services in general—locally, say, “We’re raising money for an extra machine,” and although not necessarily nationally, are also then say, “We want to fund another charity as well.” vulnerable. They have not much assets and get quite Thomas Hughes-Hallett: Absolutely, but that doesn’t a lot of public money. Health and social care come leave out all the commissioning bodies and the many next. Then you go down into areas that are less millions of people who are employed in this area. vulnerable: faith groups and foundations are not so vulnerable, so there’s a level of vulnerability. I think Q95 David Heyes: Sir Stuart, you said very early in that the Government have created a £100million your evidence that the cuts were beginning to bite, transition fund, based on that evidence. 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 Q96 David Heyes: Is that anywhere near adequate? relate to that problem—at a time when I guess the Sir Stuart Etherington: No, it’s not, because we think need for those kind of advice services are going to be the cuts are going to be much bigger than that. greater as we move forward into more and more cuts, Estimates vary, but we think that somewhere in the so there’s a real irony there. In my constituency, that region of £3 billion is not unlikely, because it’s easier sort of pace-of-change problem is leading to those to cut voluntary organisations than it is to cut your unintelligent cuts, and I can think of a number of vital core service. I think that there will be cuts in the voluntary organisations that have severe threats to service. The problem is that the decisions are coming their existence—not just to the range of services that very late, and organisations are not quite sure, even they deliver. Just picking one example out, there are now, where they will be on 1 April. That might well question marks against the viability of a volunteer be as a result of the local authority spending bureau in my constituency. It plays a vital role in settlement, but some of these decisions are coming in making links between dozens of voluntary quite late, and you’ve got quite a lot of planning organisations and hundreds—possibly thousands—of blight. It’s quite difficult to know what you would people by channelling them, training them, supporting actually do about that, but it’s certainly the case. In them and helping to increase the quantity of relation to volunteering, I think that volunteer bureaux volunteering time that’s given. We are really play an important part in encouraging people to come desperately short of people giving time at that forward and volunteer, and I think they’ve got to be individual level. I think that there are probably two part of the mix. There’s got to be capability to recruit parts to my question. First, is the pace of change just volunteers, but you recruit a lot of volunteers, too, too much? Does it need to be slowed down so that we Tom. don’t continue to get these unintelligent cuts? Thomas Hughes-Hallett: Yes, we have 10,000 regular Secondly, what can we do to encourage and support more individual volunteering of the type that emerges volunteers and up to 100,000 volunteer for us every from the volunteer bureau movement? year. I think, again, that this is part of something the Sir Stuart Etherington: I think the Government sector’s got to develop. The other day one of my slightly got the message about volunteer bureaux, colleagues told me—this is a story against Marie because in the Green Paper there’s a proposal to fund Curie—we have a waiting list at one of our hospices, them directly. and I just tore all my hair out, or what little is left, David Heyes: As I say, it’s a question mark, not a because that shouldn’t be the case. But, actually, certainty. we’ve got to get better at coming up with constructive Sir Stuart Etherington: Exactly. In terms of the ideas for volunteers and making it attractive. We now nature of the cuts, we did some work for the have a rule in Marie Curie that none of my colleagues Government on which voluntary organisations were can employ anyone unless first of all we’ve tried to likely to be most vulnerable to cuts. We looked at fill that role with a really good volunteer. And that can three factors. One was the area in which the be at any level—dare I say at Chief Executive level, organisation was operating; not the geographic area, if necessary—and our head of policy is actually a but whether they were doing employment and volunteer. Ev 14 Public Administration Committee: Evidence

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Q97 Robert Halfon: Do you think that as part of the raise the money for the nurses who are funded by school curriculum, even in primary school, there Marie Curie. I think it’s difficult. We’ve got used to it should be social action days at least once a month so being the state, and I think that’s one of the reasons that you instil the culture of volunteering or why we are not so generous as the Americans, as charitable work? Stuart said earlier, or the Australians. The fire service Sir Stuart Etherington: And giving. About four years in Australia—and the ambulance service, I think I’m ago, NCVO ran a campaign with Inland Revenue—in right in saying—is entirely funded by local fact just after the Gift Aid changes were made, so communities, so I have very mixed feelings about this. it was more than four years ago—called the Giving All I know is the practical reality, which is that the Campaign. It had a number of different elements, and safety nets are beginning to be not there for the first one that continued to be funded was called G-Nation, time since I was born. which is a programme of work run by the Institute for Citizenship in schools about giving. There were Q101 Mr Walker: Are there too many charities, Sir competitions about giving and choosing your charity Stuart? and why you choose it. If you’re going to instil a Sir Stuart Etherington: No, I don’t think there are, culture of giving, I think that you have to start very but I think what we can do is to encourage young, and I think that’s an important component of organisations to collaborate more effectively. There any giving campaign. 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 Q98 Robert Halfon: But literally social action— respond to a social need, and I wouldn’t want to say going into the community and looking after meals on that you refuse them that right, but I think there are wheels, or whatever it might be—once a month, at ways that people can be encouraged to collaborate. least. And it would be compulsory. The Charity Commission advises organisations when Thomas Hughes-Hallett: It’s got to be fun and it’s they seek to register if there’s a similar organisation got not to be mandatory. doing similar things and ask whether it wouldn’t be better to apply their talents there. But, ultimately, I Q99 Robert Halfon: Yes, but it won’t happen unless think if people are pursuing charitable objectives, they it’s part of the national curriculum. have a right to form a charity. But I would encourage Thomas Hughes-Hallett: I’m not sure about that, them to collaborate. In fact, we give advice and with respect. Sorry to quote Marie Curie again, but information on how to collaborate. There is a tax we raised £450,000 last year from something called disincentive to collaborating, in that you have to save Mini Pots of Care, and the vast majority of primary at least 20% because you can’t reclaim VAT, so there’s schools in this country had them. The children grew something that could be done—the Treasury’s looking daffodils. Unfortunately, one of our suppliers provided at this, but looking at it in my view very slowly—in us with tulips, so it was a surprise when tulips started that there is a tax disincentive to organisations coming up, but it raised a huge amount of money for working together. We can provide you with more Marie Curie—really a lot of money. The children information. loved it. They were growing these Pots of Care, and Mr Walker: They would say that in straitened times there was some basic teaching around health care. It with less money there would be more of an imperative wasn’t about terminal care; it was just some basic to collaborate, so again that supports the Chair’s view teaching around smoking and diet that wrapped that we should get a Treasury Minister here. around it, so the teachers loved it. But it wasn’t Chair: There’s a whole list of things we could ask the mandatory, so it wasn’t yet another thing that’s got to Treasury about. go into the curriculum, which is a real problem for teachers. It was actually something that helped fill fun Q102 Lindsay Roy: Just as a follow-up. In your time, but also had a lesson to attach to it. I think, view, how well does the state make a qualitative again, something the sector’s got to get better at is, judgment in relation to funding provided to charities rather than looking to Government to make things in terms of outcomes? mandatory, finding ways of getting in there. Sir Stuart Etherington: That’s a very important point. More work is being done on outcomes and impact, Q100 Lindsay Roy: It’s been a very illuminating and that, I think, is becoming increasingly an discussion. I think we want to pay credit to you and important component in funding decisions from the all those who give their time, money and expertise. state. They are looking at outcomes. They tend, I However, we live in very volatile times and uncertain think, in unintelligent procurement, to focus too much times. I’d like to get your view on where the ultimate on process—how many of this and what was the cost responsibility lies for providing a safety net for the of your stamps etc., rather than saying, “These are the most vulnerable people in our society. Is that still a outcomes we want to see, and this is the price that role for a state? we’re prepared to pay.” Thomas Hughes-Hallett: In the world that I work in, I believe if you can have a hip replacement on the Q103 Lindsay Roy: And is it a mixed picture within state for free, then surely the end of your life should the charity sector itself in terms— be cared for by the state for free as well. But I’m also Sir Stuart Etherington: In terms of outcomes? Yes it a practical man, and I want to make sure that everyone is. I think some charities don’t focus sufficiently on has a good experience at the end of life, so we need the impact that they’re having and aren’t able to to get out there and shake the tins in the streets to articulate that, and I think that influences donor Public Administration Committee: Evidence Ev 15

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington behaviour as well. As a donor, I quite like to know Q108 Paul Flynn: Why don’t chuggers approach what impact a charity is having on its constituents. people over 40? Thomas Hughes-Hallett: I think that they take the Q104 Paul Flynn: What’s your best hope and your view—this is with absolutely no disrespect to the point you’ve made, which is exactly the one that my worst nightmare for what the situation will be in trustees make to me all the time—that this is a 2015? disgraceful form of fundraising. Actually, I have to Sir Stuart Etherington: I’ll start with the nightmare: tell you, that financially it is almost the most efficient significant public spending cuts have a knock-on in terms the funds that can be raised. effect on the charitable sector, which has become Paul Flynn: So it is only the foolish under-40s? more dependent on public spending, and no other Thomas Hughes-Hallett: Only the foolish under-40s income sources rise in a way that compensates for fall for it. that, so actually you have a squeeze. We’ve become dependent on public finance to deliver services—40% Q109 Chair: You mean that for those who pay of the sector’s income now comes from that. If that commission, it’s actually a very efficient way of goes down and nothing comes to replace it, that’s the raising money? nightmare. The best scenario is that charities overall Thomas Hughes-Hallett: No. For those charities that develop a much more balanced approach to funding don’t give their chuggers commission, which we and are not as driven by public finance, so that if you don’t, it becomes the most efficient form of looked at a charity, it might have some public money fundraising. to deliver its services, because the state wants it to, but it’s balancing that with voluntary income and possibly Q110 Chair: Finally, just in the last minutes: the Big social investment as well. 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 Q105 Paul Flynn: Mr Hughes-Hallett, what about there is a suggestion that the third leg of charitable yours? finance could be social investment: loans, social Thomas Hughes-Hallett: My best hope would be that impact bonds and new financial instruments. I don’t when you leave this room to go to the coffee machine think Tom thinks it’s going to be a third leg, but I in five years’ time, you talk about who you’ve given think it might be a third leg, and the Big Society Bank money to this year and that becomes part of normal predates the Government—it used to be called the conversation culture, which it absolutely isn’t at the Social Investment Wholesale Bank. The idea is that it moment. My worst nightmare is that personal tax rates will start to capitalise some of the social investment have to go up to fund a diminished state, as a result institutions that are out there, such as Charity Bank, of which giving falls sharply. Triodos, Unity Trust—banks that lend to charities and other social enterprises—and I think it has potential Q106 Chair: But that’s what we don’t do in this to develop that market. Tom, you don’t. country. It’s embarrassing to brag about who you’ve Thomas Hughes-Hallett: I am just a total Luddite on this. I find it wonderful, having been a banker—I left given money to. It’s a sort of Jeffrey Archer thing to in 2000—that what nearly brought the banking system do, isn’t it? down was inappropriate lending, but we are now Thomas Hughes-Hallett: It is a real problem. I made potentially setting up a system to encourage the most a donation to the Suffolk Community Foundation the vulnerable charities to borrow money. There has also other day of £100,000, and it was in the paper. It asked been a rather bizarre suggestion from the Association my permission to put it in the paper because it would of Chief Executives of Voluntary Organisations that encourage other people to give as well. The only there should be compulsory tax on bonuses that comment I’ve had from my friends is that I was should be given to this bank so that the money can be showing off, whereas in America that would be made available to the most vulnerable charities. Well, absolutely standard. I think it is beneficiaries who should be vulnerable, not charities, and if charities are vulnerable, that might Q107 Chair: But the answer is, “Yes, I am showing be because they are mismanaged. I am very sceptical. off and aren’t you jealous?” In the 10 years and three months that I have been Thomas Hughes-Hallett: Yes, well maybe. Chief Executive of Marie Curie, we have never borrowed one penny, and while I’m Chief Executive, Mr Walker: It depends on what tone of voice they we never will. At this moment in time there are lots use. It could have been a generous tone of voice. of words bandied around that, bluntly, nobody Thomas Hughes-Hallett: On the whole it was. understands, such as “social action”, “social Robert Halfon: It’s true, because if you go abroad, innovation” and “social impact bonds”. The public whether it’s America or Jews giving money to Israel, don’t have a clue what people are talking about, but there are always buildings all over the place with, in basically charities are being encouraged to borrow. big letters, “The Mr Bloggs Building”, or whatever it I’m sorry, but I don’t like it—call me old-fashioned. might be, and in America you see it all the time. Mr Walker: No, I think you’re very sensible. Chair: I forgot to declare my interest at the outset: I have raised and given money to Combat Stress. Q111 Robert Halfon: Two final questions if I may. Thomas Hughes-Hallett: Good. On the Big Society Bank, would a better model have Ev 16 Public Administration Committee: Evidence

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington been a giant credit union in which charities could have much of the money that goes to charity is decided by saved and then received a return, which would have the great and the good rather than the public been a voluntary institution that could have been themselves. I want to work out a mechanism through topped up with the assets of unclaimed assets and so which the public have much more say on how their on? charitable money is spent. Thomas Hughes-Hallett: I think that’s an excellent Chair: But won’t they just give more and more idea. money to animals? Sir Stuart Etherington: It does exist in a form. Robert Halfon: Not necessarily. I could bet you that Charities Aid Foundation has something where you thousands of people in my constituency would give can actually place money on investment and you get money to your organisation. a return on that. Mr Walker: I’m very involved in mental health, and they wouldn’t give any money to mental health Q112 Robert Halfon: This would be particularly charities. With the greatest and most enormous respect because of your point, which I accept, about smaller to cancer charities—my father died at 46 from cancer, charities. Smaller charities would be able to save a so I know what a devastating illness it is—there is a proportion, and it would work exactly like a credit danger that large, emotive charities, particularly in the union. It would be a giant credit union for the cancer field, are going to crowd out other charities charities. when it comes to giving, so there is a role for the great Sir Stuart Etherington: There are common and the good. investment funds. There are vehicles that charities use Thomas Hughes-Hallett: I completely agree with to pool their money to get a return. you, and I think that one of the problems we have is the most needed charities are very often the least Q113 Robert Halfon: My final question, which is a populist—dare I say even with politicians. In fact, I different thing that you touched on earlier in your cornered the Prime Minister shortly before the remarks. You said briefly that the National Lottery had election and said, “You must get your speechwriters looked for a short time at the allocation of money. to put mental health and end-of-life care in your Would one way of solving this problem be if, when speeches sometimes.” He was very grateful for the people bought a lottery ticket, there were three options remark, actually—he said it was a very fair point. I on it so that they could tick for a local charity, a used to be a trustee at Great Ormond Street Hospital, national charity or an international charity? Okay, that and I also used to chair the Michael Palin Centre for wouldn’t be perfect, but at least when people bought Stammering Children. It’s quite easy to raise money their ticket they would have some idea of how their for those two organisations, but raising money for money was going to be spent, because at the moment mental health and end-of-life care is really difficult. it’s still decided by the great and the good, and no one It’s just not very sexy. has a clue about how the money is allocated, and people see it to be an unfair and unjust allocation of funds. Q116 Chair: Are there any further questions? Is there Sir Stuart Etherington: I think it’s quite difficult to anything you’d like to add that you feel we’ve do that in a fair way with 180,000 charities, in missed? fairness. One way it’s done, interestingly, is as part of Thomas Hughes-Hallett: Could I add just one thing? Waitrose’s corporate social responsibility. I don’t When and if you interview the Treasury Minister, or know if you shop in Waitrose, but you get a green whoever, I think there is potentially one area of great token that you put in a transparent box, and money growth in charitable giving: lifetime legacies. A goes to one of three charities that the local store has quarter of our income comes from legacies, and the chosen. I think that’s quite a motivator for giving, person who gives the money never gets any of the because you feel that you know where the pleasure from giving it because he’s six foot under, so organisation is going to allocate it. But the Lottery is it’s your lawyer who gets the pleasure. A lot of work on a different scale, and there are a lot of charities, so has been done on this in this country and in America, I’m not so sure how you would do that. and we think, with no loss to the Treasury, that when you decide that you want to give your house away Q114 Robert Halfon: But if you could work out the after your death to a charity—because you might be nuts and bolts, would it be an idea you would support? the sole survivor, you may be single, your wife may Sir Stuart Etherington: I think a way of doing it is to have died or whatever—how nice it would be to be get views from the public about where the money able to do that in your own lifetime, rather than allow goes. It’s quite difficult to get a direct system to your lawyer to be the only person to get thanked. I operate, because there are just so many charities, and just wanted to make that point. the Lottery is going to be under increasing demand Chair: Preferably without having to pay capital gains because that’s where charities are going to turn as tax, if it’s a second home. their public money goes down. If charitable income Thomas Hughes-Hallett: The Government shouldn’t doesn’t rise at a significant rate, they’re going to form suffer in any way. a queue at the National Lottery, so there is going to Chair: This has been an immensely helpful session be a much greater demand for Lottery funds. for us. Thank you very much. One of the advantages of not cluttering our time up with the Minister is that Q115 Robert Halfon: In essence, what I’m saying— we’ve had more time with you than we would have going back to Comic Relief and so on—is that too done. I think I would invite you to submit anything in Public Administration Committee: Evidence Ev 17

18 January 2011 Thomas Hughes-Hallett and Sir Stuart Etherington writing to us before we interview Ministers, and I White Paper before we have Ministers in front of us, might suggest to the Clerk that we actually do a proper because I think you’ve given us very good food for call for evidence on the whole question of the giving thought. Thank you very much indeed. Ev 18 Public Administration Committee: Evidence

Wednesday 16 February 2011

Members present: Mr Bernard Jenkin (Chair)

Nick de Bois David Heyes Charlie Elphicke Kelvin Hopkins Paul Flynn Greg Mulholland Robert Halfon Lindsay Roy ______

Witnesses: Justine Greening MP, Economic Secretary, HM Treasury, and Nick Hurd MP, Minister for Civil Society, Cabinet Office, gave evidence.

Q117 Chair: Welcome to our two witnesses. Could tackling the deeply entrenched social challenges that you identify yourselves for the record, please? the country faces, which are massively expensive, not Mr Hurd: I am the Minister for Civil Society, Nick only in financial terms, but, more importantly, in Hurd. human terms, we have to be honest and realise that big Justine Greening: I am Justine Greening, Economic government failed and we need a different solution. It Secretary to the Treasury. is a journey and it will not happen overnight, but we Chair: Thank you both very much for coming today. are working towards a much more effective It is very much appreciated. The session was partnership among a more open and realistic originally provoked by the publication of the Government, a more socially responsible business “Funding the Future” report by the National Council community, a resilient and independent civil society, of Voluntary Services, which first raised the concern and us—as active citizens in communities who about how the voluntary sector will cope in the genuinely feel that the Government are on their side present era of public expenditure restraint. That debate and want to encourage and support them, rather than, and the debate about the Big Society have taken off “Computer says no.” in the intervening period, so this is a very topical session. We will ask you questions about the Big Q122 Robert Halfon: As far as the strength of the Society as well. social capital is concerned, what are the Big Society I would just like to add that we do understand that, as measures? a Treasury Minister, you’re somewhat constrained as we approach the Budget in what you can say, but we Mr Hurd: Let me start from an important premise: it are very grateful to you for being here to engage in is absolutely vital that the Big Society opportunity— the debate. Though we accept there will be the transfer and decentralisation of power, the form of qualifications to what you say, but we hope that you public services, and everything we are doing to will be free to give your personal views on some of encourage and support people who want to get more these matters. involved—is available to everyone. I think that members of the Committee will recognise Q118 Robert Halfon: Good morning. There are a lot that we have very different types of communities in of definitions out there of the Big Society, and the Britain. I am lucky enough to represent a relatively words “social capital” and “community” are used affluent part of the country, where the social capital is quite a bit. What is your definition of community? rich and communities are well organised. With a bit Mr Hurd: It is where we live, where we share space of retuning, I think that they can seize the and, often, where we work together—networks of opportunities that will be presented, but we recognise people. that there are other communities in the country where that is less obvious. There may well be social capital, Q119 Robert Halfon: When we talk about social but it is less visible. There may be less of a tradition capital, what is meant by that? What is strengthening of self-help and self-reliance. social capital? The Government is very clear that we need to be Mr Hurd: Bridges of trust between people. proactive in trying to support those communities and unlock the capacity in them to seize the opportunities. Q120 Robert Halfon: If you had to give a doorstep In direct answer to your question, that is the focus of definition of the Big Society, what would that be? the programmes that we are running on community Mr Hurd: For me, it is about transferring real power organisers and our new neighbourhood grant fund, to our constituents. which is about putting small amounts of money into the hands of neighbourhood groups to help them to Q121 Robert Halfon: What about the people power implement their own plans. There is also the work that element of it? Can you expand on that a bit? our colleagues at DCLG are doing on the Sustainable Mr Hurd: The question is, why? You’ve asked for a Communities Act, in which I have a strong personal snapshot but, as you know, the concept is much more interest, and on encouraging communities to come complex and doesn’t lend itself to the snappy forward to say, “We want to do this, but this is getting soundbite—it’s bigger than that. What the in our way, can you take it away?” That is Government and the Prime Minister argue increasingly what the DCLG is being retooled to passionately is that if we are going to get serious about offer communities. Public Administration Committee: Evidence Ev 19

16 February 2011 Justine Greening MP and Nick Hurd MP

Q123 Robert Halfon: Do you agree with what has Q125 Robert Halfon: Part of the problem is that you been described, which is that the Big Society is about get slightly different definitions from each person. incentivising social entrepreneurs as much as Whenever the news interviews a person responsible Governments have tried to incentivise economic for the Big Society—whether ambassadors, Lord Wei entrepreneurs? If so, how are those social or whoever—each person gives a slightly different entrepreneurs meant to be incentivised? definition of what it is, which doesn’t help. Mr Hurd: Again, I think that the premise is right. The Chair: The Prime Minister is in charge. context is that we all know that we are living through Mr Hurd: Yes, the Prime Minister was in charge, the an extremely challenging time, because there is less last time I looked. money around and we need to find different ways of doing things. There is virtually no organisation in the Q126 Lindsay Roy: Good morning. Why do you country that is not rethinking what it does, why it think that the Mayor of London has apparently described the Big Society initiative as a pile of exists or thinking about better ways of doing things. 1 In this country, we are extraordinarily lucky to have a piffle ? group of people, or a network of people, who you can Mr Hurd: I have absolutely no idea whether he said call social entrepreneurs. Such people get up in the that, but if he did, I disagree. Again, I look at it through the prism of my constituency. I think we have morning, thinking about taking risks to try to find barely tapped the potential of what could be achieved different ways of helping people, and they need more if Government, business, the voluntary and support. We are giving priority to trying to give them community sector, and people in the community who easier access to capital—patient capital, which is have things to contribute are engaged together more. money that will back them for a period of time, so it We have barely scratched the surface, so I do not call is not just about scrambling around for grants here that opportunity piffle. Nor do I describe as piffle the and there. It is about patient capital that will back huge amount of work that is going on across them and it is also about advice on how they use that Government to try to enable communities and to capital most efficiently. That is at the heart of our transfer this power. Some of that hasn’t been visible, strategy to grow the social investment market, which but a massive amount of work is ongoing across we published this week, and that’s at the heart of the Government, so this isn’t piffle. It also goes with the Big Society Bank project. grain of what people want, which is to have their voices more respected and to have more influence Q124 Robert Halfon: Some people say that one over what is really important to them. They want to reason why it has been hard for the Big Society feel better connected in communities and to feel part definition to catch on is that there has been a lot of of something bigger. None of that sounds like piffle confusion, and that there are so many people in to me. government and around it who are responsible. As well as yourself, there is Francis Maude, Oliver Q127 Lindsay Roy: On Monday the Prime Minister Letwin and Lord Wei, and there are the new Big felt it necessary to relaunch the initiative. What have Society ambassadors, and the Big Society Network. we learned that is new to help facilitate our There is a lot of confusion about who is actually in understanding and indeed, the impact? charge. Should there not be one person in the Cabinet Mr Hurd: At the very least, the public saw a Prime who is a kind of Big Society enforcer and who has Minister who burnt with conviction on this issue. That real power to implement the Big Society, and to help hasn’t always been the case, and he is absolutely implement it across government? determined to continue down the path of giving our constituents real power. It will become more evident Mr Hurd: I have reservations about that, because it as, if you like, action follows the words about what plays to the misconception that this is just a that actually means. You know, everyone here knows Government programme, and that this is something as well as I do, that Greg Clark is sitting in Committee top-down that is being imposed. Actually, for this to taking the Localism Bill through clause by clause. succeed, it is about the human response at grass- This is real legislation enabling and transferring real roots level. power. As people begin to understand that more, to On the role of Government, the Big Society is cross- touch it more and to see more activity on the ground— departmental, and the Prime Minister has made it clear this isn’t going to happen overnight, Mr Roy, I think that this is not just a Cabinet Office responsibility. It you know as well as I do—people will begin to get it is for every Department to be thinking about what it more. What they heard at the beginning of this week is doing to transfer power and engage citizens. There was the Prime Minister absolutely committed to are lots of Big Society Ministers, and believe it or not, giving them more power. we have a Big Society inter-ministerial group, with 14 or 15 people sitting around the table. In terms of the co-ordination function that you might expect, the Q128 Lindsay Roy: There are few who would argue Cabinet Office has a lead role to play. As far as with the mission statement. I think that the difficulty ambassadors are concerned, as you say, it can be a is that people find it challenging to see how that would difficult thing to get across. In some way, it’s a new translate into effective practice and implementation on message from Government; it’s not what we’re used the ground. Do you have further advice to us about to hearing, and we feel that we need more people out 1 Note from Member: Correction—Lindsay Roy apologises for there telling the story. this quote which was incorrect. Ev 20 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP how that’s going to happen—a coherent strategy? Q131 Chair: Isn’t part of the problem with Mr Hurd: In terms of what Government are doing— communicating this idea, that in fact it is a very old we must never lose sight of the fact that it isn’t about idea, and it’s an idea that already exists and a very Government alone. The picture I was trying to paint strong tradition in our society? It is almost as though was about a much more effective partnership between the Prime Minister was doing a bit of “motherhood the various elements in society. But in terms of, if you and apple pie”, and stating the obvious, though like, what people expect now, what are Government perhaps the obvious has become a bit squeezed out by doing about this? The Prime Minister has made it very big government. Do you think that is a fair clear that this isn’t a case of the Government just description? stepping back and expecting thousands of flowers to Mr Hurd: Let me put it in this way. We’re not bloom. We have an extremely big role to play. inventing something here. The idea of giving power There are three strands of Government action. The to the people is one of the oldest political slogans in first is about transferring real power—that has already history. I think the difference here is that we are started in terms of information. Every MP now knows absolutely serious about it. But nor is it just about the power of transparency. Information is a huge encouraging people to get involved in traditional power tool, and whether it is crime maps or volunteering. You would be entirely right, Mr information about local authority chief executive Chairman, in pointing out the fact that across the salaries, more information is going out into the public country there are networks in place of people doing domain. I think people are spotting that. In terms of extraordinary things to help people and improve lives new rights and opportunities at community level to and communities. The Prime Minister has made it get things done and take things over, if that’s what quite clear that we need to recognise and value that. people want, again, the Localism Bill is the specific, It’s about building on that. But it is more than that— complex, big piece of legislation, but I think people what I was trying to get across is that we want to get are beginning to tune into that now. That is the first people involved in more than that, involved in really strand—transferring real power to communities. trying to shape the decisions that influence the future The second strand is about public service reform. of the community, such as getting involved more in Again, I think that people are beginning to sense the planning process. We want to get people more what’s driving that: the desire to open the public involved in shaping—and yes, even delivering— service markets and get the citizen engaged more, public services. That’s the change. That’s where I liberate people in the front line. Various elements are think it’s bigger and more radical than just coming out now: support for mutuals and social encouraging volunteering, however valuable that is. enterprises within the public services. I have visited Chair: Before we move on, three very brief questions. one—it’s real. I’ve looked into the eyes of two nurses Mr Mulholland. who have done this, and you can sense that something very different and very important has happened. They Q132 Greg Mulholland: Very briefly, Nick, you feel completely liberated. You get a sense of the have said that you are trying to get away from this potential here. People are increasingly aware of the “computer says no” idea, and a lot of the discussion right to set up new free schools. That could be very today will be about the funding concerns and whether ambitious and scary for some people, but 250-odd the Big Society will deliver. However, a lot of the groups have already signed up to try to do that. People Big Society can be delivered without the Government are aware of the transfer of power to GPs—that’s all spending a penny. The planning system currently says about bringing those decisions closer to patients. no to local communities, so why on earth have the Again, as that becomes clearer, people will begin to Government backtracked on the commitment in both understand what community budgets, what the Liberal Democrat and Conservative manifestos to personalised budgets are. This is the whole direction give communities a real say over the planning system of travel. by abandoning the third party right of appeal? Chair: Minister, you’ve given us some very full Mr Hurd: It is not my specific policy area, but if you answers. We’re going to have to move a little bit had Greg Clark here, he would launch into a faster. passionate exposition of his determination to get Mr Hurd: I’m sorry. neighbourhoods and communities involved in the Chair: I thought it was important that you should planning process. Indeed, that is a large part of the have that freedom to start with. Localism Bill, in terms of trying to encourage and enable neighbourhoods to develop their own plans, Q129 Lindsay Roy: This is not completely laissez- which then need to sit within local authority faire, though. It requires careful and considered co- frameworks and suchlike. I know from my own ordination, would you agree? constituency that one of the biggest frustrations in the Mr Hurd: It requires careful co-ordination; it requires community comes from the difficulty of getting voices recognition that Government has a role to play in heard or getting involved in the planning process. It helping citizens respond to these opportunities. feels like decisions are taken too far away from the community, and that is what Greg Clark is trying to Q130 Lindsay Roy: And inspirational leadership at change. political level and through to our communities? Mr Hurd: I think that inspirational leadership was on Q133 Greg Mulholland: I have a debate this display this week. It is certainly there and I don’t think afternoon specifically about pubs in the planning it is going away. process. Do you share my disappointment that the Public Administration Committee: Evidence Ev 21

16 February 2011 Justine Greening MP and Nick Hurd MP

Localism Bill as drafted will do nothing to stop pubs over the last 40 years, at least. I’ve yet to hear being demolished—or turned into a Tesco for anything new. example—with no planning permission needed and Mr Hurd: I think I was trying to make the point that therefore no consultation with the community lots of Governments have talked about this, but we whatsoever? Could I discuss that with you so that we are determined to try to deliver. can put some pressure on Greg and the team? Chair: Briefly. Q139 Paul Flynn: Do you really think that someone Mr Hurd: I am very happy to have that discussion. like you—the son of a Cabinet Minister who All I would say is that the Sustainable Communities represents leafy suburbs—could come down to Act 2007 and that process is a mechanism to allow constituencies that many of us represent, where the local communities to continue to press that agenda, if parents’ generation lost their jobs in the coal and steel they want to. industries, and where the younger generation is being sacked because of the cuts, and tell them that they will Q134 Charlie Elphicke: The whole discussion about be liberated by being allowed to work for nothing? the Big Society seems to be thrusting policy Mr Hurd: No, that is not what I am saying. downwards. Is it not the essence of the Big Society that no one cares about my backyard more than I do? Q140 Paul Flynn: That’s what the reality is though, For example, in my own constituency we have a Big isn’t it? Society project to take over the port of Dover. Mr Hurd: This isn’t about Ministers; this is about Mr Hurd: I’ve heard of it. what people in those communities feel they want to do for themselves to help each other, and it is sending Q135 Charlie Elphicke: Is it not important that we a signal to them that, actually, the Government is on say to communities, “You come up with the ideas; we your side. will let 1,000 flowers grow,” and emphasise that it should be more bottom up and that the grassroots Q141 Paul Flynn: I’ve been here under six Prime should bring forward these ideas and be encouraged? Ministers and they’ve all had strange ideas at some Mr Hurd: Yes, that is the thrust of the message, and times—this one is very reminiscent of John Major’s it’s quite a big culture change, but I strongly believe cones hotline. It was ridiculed by his colleagues in that there are people and leaders in communities who the same way as you can hardly talk to one of your will respond to this opportunity. That is what we are representatives over a pint of sarsaparilla without trying to reach. I use the example of our them sneering at this idea of a Big Society. Isn’t it neighbourhood grants programme: if you want to get about time that someone told Emperor Cameron that something done in your neighbourhood, here’s access his idea has got no clothes? to a pot of money that will enable you to get that done, Mr Hurd: No, and he will tell them that he is start a journey of pulling the community together, and absolutely committed to this. I think you’re think about more community action. underestimating the interest at community level— Chair: Forgive me, but I think the word “yes” would Paul Flynn: All you’ve got to offer is— have done. Chair: Let the Minister answer, please. Mr Hurd: I think you’re underestimating the interest Q136 Robert Halfon: One of the problems we’ve at community level for more space and freedom to get had has been with the voluntary sector, and I’m not involved and get things done. just talking about it being upset about the cuts and so on, which is expected given the current economic Q142 Paul Flynn: We’ve all seen brilliant politicians climate. Do you think it might be a good idea—I don’t in our lifetimes who have produced rhetoric and know if you’re doing this already—to have, with convinced audiences that black is white and that truth every domestic piece of legislation, an impact is lies. We could give a long list of them. Tony Blair assessment on the Big Society to look at its impact on was the last one. He took us into war on the basis of communities and the voluntary sector? That would be what we know—with absolute certainty this morning, a way to bring the charities and voluntary sector on as the newspapers are telling us—was a lie. Your board. leader produced a bit more rhetoric this week. He was Mr Hurd: I can take that back to the Cabinet Office certainly impassioned. He was strong and convincing, to think about. I’m trying to get across that there is a but that is it—it’s a veneer; it’s a nothing. We’re strong effort to try to co-ordinate Government getting a number of stale ideas, many of them worthy, Departments so that they think about their policies and you’ve put them together into a little package and through this prism. tried to sell it, but the result has been public ridicule. Mr Hurd: The Localism Bill is not a veneer. The Q137 Paul Flynn: We are starting on a journey increased amount of information in the public realm where 1,000 flowers will bloom. Is this Mao Tse-tung is not a veneer. The public service reform White with sprayed-on rhetoric? Paper, when it comes out next month, will not be a Mr Hurd: All I’ve tried to convey is that this is about veneer. The Big Society Bank is not a veneer. This is quite a big culture change, and we have to manage serious. These are words being backed up by action. expectations— Q143 Chair: Moving on, isn’t the difficulty that the Q138 Paul Flynn: No it’s not. Every idea that you’ve rejuvenation of this old idea is coinciding with very come up with has been put forward by Governments severe pressures on the public sector? In particular, Ev 22 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP after a period of very rapid expansion of funding for citizen service pilots. We have community organisers charities from the Government—such that I believe and a Communities First fund. There is a range of 52% of charitable income comes directly or indirectly support for charities, not least outside the tax system. from Government these days, and that has risen very I completely agree with you about the EU budget, and sharply—that is now going to be very substantially the Government are working as hard as they can to cut back. We have got a very large number of major secure a reduction in that over the short, medium and charities who feel that the Big Society rhetoric is a long term. cover for what they feel is an attack on their existence by the reduction in funding. Q146 Chair: The Government agreed it, and there is Mr Hurd: A question? going to be a very large increase in the net Chair: A question. contribution to the EU. I should imagine that if the Mr Hurd: Obviously, that voice is being heard. If I Big Society had a vote on the matter, they would may correct a statistic, the latest information I saw is rather fund Sure Start, community transport schemes that the sector receives about 36% of its income from and social enterprises in the inner cities than a bloated the state. Either way, the basic premise is right; that EU budget. Are the Government doing enough about is where the growth in income has been for the sector. that? In response, we should never forget that the vast majority of organisations in the voluntary sector do Justine Greening: I am sure that many voters will what they do with no money from the state. Most of share my utter dismay and frustration at the last our constituents might be quite surprised that the Government’s decision to give away part of the sector receives around £13 billion a year of taxpayers’ abatement, which is now costing us approximately £2 money—that’s before gift aid. And you’re right, billion a year. That is one of the main reasons why Chair, that that is going to reduce. We do not have, our EU budget contributions are going up. Like many and no one has, a hard number on what the scale of people in Britain, I find the deal that was done by that reduction is going to be, but it is quite clear—we Tony Blair as Prime Minister totally unacceptable. have always been upfront in saying this—that the sector cannot be immune from this process as the Q147 Kelvin Hopkins: I agree entirely. If the scale of the challenge is too great. What we are trying Government were serious about it, could we not just to do at the Cabinet Office and the Office for Civil give notice to the European Union that we were going Society is to play our part in trying to help the sector to go back to the previous arrangement and reduce our manage through this very painful period of transition. contribution to what it was before Blair did his There is a lot of detail that we can go into, but the giveaway? biggest element is the £100 million Transition Fund— Justine Greening: At the risk of straying off the topic, taxpayers’ money—on the table. under legal arrangements with the EU, we clearly can’t simply not pay the money. I assure you, Kelvin, Q144 Chair: We will come to that later. Economic that, as you know, we are working very hard to Secretary, could you talk about the Government’s achieve a number of things: first, to reduce the EU spending priorities? I imagine a great many of the budget; secondly, to see it spent on things that add public who depend on the funding that charities get value; and, thirdly, to protect the abatement. from the state would feel, for example, that the Chair: I think that we should move on. funding for the charitable sector should be protected, perhaps at the expense of overseas aid, which is being Q148 Kelvin Hopkins: I have a simple question. protected and dramatically increased, or indeed of a What research evidence is there that consumers—our very large net contribution to the European Union, which is being increased by 217% over the planned voters—want to have services delivered by charities period at the same time as charitable funding is being and volunteers rather than by publicly elected bodies cut. How do you justify these spending priorities? and professionals? Are they not like me? I want to Justine Greening: First, the commitment to overseas pay my taxes to local authorities and central aid is actually to meet the 0.7% of GDP target so, Government and get them to provide good services as of course, unless we get the economy back on track, they are democratically accountable. overseas aid won’t be able to increase, but we think Justine Greening: What is important is giving people that’s an important commitment that we made prior to the choice. I am sure that Nick Hurd will have some the election. views on this, but whether you talk to charities or to local authorities—or indeed to the people whom they Q145 Chair: But overseas aid is clearly more all serve—people want choice. Often, they find that important than funding for these charities in the they prefer getting their services delivered by local Government’s view? charities. Again, I am sure that Nick Hurd will have Justine Greening: There is significant support for more information on this, but if you look at other charities from the Government, not least through the countries that have already gone down this path— tax system, which I am sure we’ll come to shortly. As places such as Australia—they have challenged Nick Hurd said, we put in place a £100 million whether they can get charities and non-government Transition Fund because we know that, for some organisations more involved in providing services. In charities, these are particularly challenging times, and fact, now that Australia has gone down this road, I am we want to help those involved at the local level in pretty sure that one of the largest providers of adult providing services. We have also put in place national social services is the Salvation Army. Public Administration Committee: Evidence Ev 23

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Q149 Kelvin Hopkins: The Salvation Army was the public services, trust the public, sometimes with invented in the 19th century to deal with appalling money? That can be at local authority level and poverty and the public services were invented to bring Government level. We are trying to overturn years of in a professional and accountable system. Again, there institutional behaviour. How long will it take and do is a problem of accountability with the voluntary you think that you can facilitate that through all sector. aspects of government, local and national? When local authorities do not measure up, the MP Mr Hurd: It is a challenge. It is a culture change. We gets on to them and you can get the newspapers on to have things that we can do. The Localism Bill them—and we don’t vote for them next time round. It contains a right to challenge existing provision, which is the same with the Government. If a local voluntary is important. You are right to pinpoint the human body or a charity fails to provide, the national reaction dimension to this, which is why we are, through the is that the Government have to do something. People Office for Civil Society, investing in the training of inevitably turn to the state when the private or commissioners and a partnership improvement voluntary sectors fail. Should we not accept that the programme, which is about bringing together modern age is an age of professionally provided commissioners and civil society providers to try to services that are accountable democratically? develop better mutual understanding and break down Justine Greening: We should be aiming for services some of those barriers that exist, in the name of that actually work for people on the ground. Local wanting to facilitate more choice and competition and authorities are increasingly—and rightly—looking at trying to create the conditions whereby the tax payer, how they can commission them in a way that works who uses the public services, gets a better result. better for their local taxpayer. There is still the accountability, but there is more of an ability for them Q152 Nick de Bois: One more question linked to the to structure their services at the local level to work funding. I am beginning to sense that there is almost a for people. If, for whatever reason, people feel more sense of powerlessness over stopping local authorities comfortable with their services being delivered by the effectively choosing to cut some of the voluntary charitable sector—perhaps it already has expertise in services. There are obviously powers from the centre. dealing with particular people within the It seems that we have to champion that argument community—it should be able to get on with that. locally. Is that also a reflection of local government Mr Hurd: When it comes to the really tough stuff— being reluctant to let go of the chains of control and getting the long-term unemployed back into jobs, command? Do you feel powerless and that you cannot getting people off drugs or keeping people out of do more? jail—the evidence is beginning to build that the really Mr Hurd: You’re right to highlight a problem; this is valuable work is being done by charities and social about local choices. It is a mixed picture. I have enterprise. Why not try to create the space so that they colleagues bringing in their sector on an almost daily can compete in the market? It is about not just giving basis and it is a very mixed picture. Some local people choice, but giving value to the taxpayer. authorities take a much more constructive approach to this. They recognise that they have to do things in Q150 Kelvin Hopkins: If you are talking about different ways and want to work with the voluntary choices, you are coming back to my original question. and community sectors. Others are pulling up the What research has been done to ask whether people drawbridge and protecting their empire, if I can put it want that, or want good, professionally provided that way, and making quite brutal cuts without any public services that are paid for out of general taxation consultation. So it is a mixed picture. Apart from the and free at the point of need? Transition Fund, we can require local authorities to be Justine Greening: Ultimately, as has already been transparent about this process—that was announced said, people have their voice at the ballot box. If they last Friday—so that people can begin to compare and are unhappy with their services, they will get a group contrast activity. The Prime Minister has sent a clear of councillors that gets them better services. steer about wanting them to look at opportunities to make efficiencies and savings before making those Q151 Nick de Bois: I would like to build on that. I cuts and many local authorities, like my own at apologise if I sound like I’m rambling. I will try not Hillingdon, have done exactly that. It is about to, but I want to give the background to my question, celebrating best practice and investing in that which is addressed to you, Mr Hurd. One of the most partnership programme that I talked about. So we do common phrases that I have come across over many not feel totally powerless, but ultimately these are years, particularly over the past five years, has been local authority decisions and they have to be free to people in the public sector saying, “I could run this make them. better and more efficiently and get better outcomes.” The Big Society concept will allow people to be free Q153 Chair: That demonstrates the paradox at the to do just that. heart of this. You are trying to localise and let go and I passionately support that. Government can pull then you have to tell the local authority what to do levers to put that opportunity in place. I accept that because they are not giving away enough freedom or the public must have the confidence and do the take- decentralising themselves enough. How do you up. However, I am worried about one thing. What can reconcile that? you do to ensure that officials, who for years have Mr Hurd: This is awkward territory but the bottom been under the command and control of the public line is that they are accountable to their communities. services and who have delivered everything through It is their decision. Ev 24 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP

Q154 Chair: Do you think the Civil Service has the helpful to leave it later and have more flexible criteria, necessary skill set to do this fourth skill of working or is this the way it has to be? with voluntary organisations? We know of exceptional Mr Hurd: Our instinct was to try to make money people who work in the inner cities or communities available as quickly as possible with the minimum but they are the exception in the public service rather amount of bureaucracy attached to it. We also wanted than the rule because we do not generally train civil to make money available in the current financial year; servants to undertake that kind of role. we had to move quickly to do that. So of the £100 Mr Hurd: You are right. This is about a culture million, £10 million is allocated for this financial year change which cannot be turned round overnight but and £90 million for next. We decided to run one we are trying to encourage this. We will be process so that we could provide this opportunity as announcing plans to encourage civil servants to do quickly as possible. more community work and civic service.

Q155 Chair: Is there a programme for training the Q158 Chair: Aren’t we in danger of tempting people thousands of public servants who will be necessary to believe what cannot be delivered, which is that the to help deliver this culture change? What training is Big Society will somehow replace the withdrawal of taking place? public funding from much of the charitable sector? Mr Hurd: A lot civil servants are doing a lot of work The quantums are just completely different and the in their communities right now. We should recognise time frames are completely different. The Transition that. What you will be hearing are plans to encourage Fund is a mild amelioration of some of the problems that further. We are investing in training of that charities will face, but it cannot possibly commissioners and a lot of it is about leadership at compensate for the loss of income that they will Department level. I mentioned DCLG before; they suffer. want to re-tune that Department to be less subservient Mr Hurd: It’s not going to compensate fully, and we to Ministers and more about providing help and have always been quite clear that we can’t protect support to communities. every single charity and voluntary group from a Chair: It is about training and leadership. reduction in public expenditure, because the scale of the reduction that we need to make is so great. We Q156 Charlie Elphicke: Touching on the issue of the have always been quite up front about that. We are amount of public money charities have got, over the absolutely committed to trying to find some public last decade the whole idea of charities walking the money to help the most vulnerable organisations walk, rattling the tin, raising voluntary donations and manage a transition. I am absolutely sure that that was dealing with need got lost in the desire to grab as the right thing to do. Resources were limited, and we much Government money as possible, advertise, had to set some quite strict criteria. campaign—publicly educate is the phrase that comes to mind—and pay their chief executives in many cases Q159 Robert Halfon: Isn’t the purpose of the Big £150,000 or more. Society to support those really at the grass roots? Isn’t Nevertheless, the adjustment, while correct, making the charities go back to walking the walk rather than the criterion that you have set for the Transition Fund talking about help and need, is going to be a difficult a little high? I think that it is from £50,000 upwards challenge for many charities. How much of a safety on the turnover of the charity. Many small, grass-roots net will the Transition Fund be to help voluntary charities, which do loads of great things in their bodies that are now working to cover the funding gap? communities—but don’t have public affairs budgets, Mr Hurd: It’s £100 million. We are looking at don’t do political campaigning and don’t spend money whether there are any opportunities to top that up but on all sorts of things that bigger charities do—are there is very little money in the system. It was going to suffer. Could you not have set the criterion designed to get money out as quickly as possible to lower, at £20,000, to make it more amenable to grass- organisations that are extremely dependent on public roots charities? income but have aspirations to deliver more public Mr Hurd: The thing is we had to set some limits, and services. We therefore had to set strict criteria for it. that was the limit that we chose. The data show that We had 1,700 applications and £170 million of it is above that level that dependency on state income demand against the £100 million and the Big Lottery grows. We had to make a tough choice on where to Fund are processing those. We announced yesterday set the threshold, because resources were limited. the first recipients of it. But the fund is designed to try to help those organisations to get out of a hole as Q160 Paul Flynn: What will happen if the European long as they have a plan. It is about trying to manage Commission doesn’t approve of the Big Society a transition. Bank? Mr Hurd: We are not currently working with that Q157 Charlie Elphicke: Following on from that, scenario. We have no reason to expect that. you’ve strict eligibility criteria. You have a deadline which passes before many of these charities know whether they are going to get money from the local Q161 Paul Flynn: You may not, but it is a authority and they are also in a situation where they possibility. will lose 3p in the pound donated by gift aid from the Mr Hurd: As I say, we are absolutely not end of March. Do you think it might have been more contemplating that scenario. Public Administration Committee: Evidence Ev 25

16 February 2011 Justine Greening MP and Nick Hurd MP

Q162 Paul Flynn: You could be walking off a current private sector is not prepared to take. It is not precipice, and you are deciding not to notice that there there to duplicate or compete with private capital that is a precipice there. is deployed at the moment. It is there to try to fill a Mr Hurd: In which case, we will have the £200 gap, which is to help social entrepreneurs to access million that has been committed by the largest UK capital. Whether that be in the form of loans, bonds, banks. That’s on the table. It is permanent capital and equity or quasi-equity, across the spectrum it is going it is there. But, as I have said, we are working on the to have as much flexibility as possible. That is why it assumption that we will not have a problem with the is important for it to be independent of Government. EU. It’s just that we don’t know quite how long that will take. Q169 Paul Flynn: The Government have taken £5 billion from charities. How could this piddling amount Q163 Paul Flynn: What sort of social enterprise will possibly compensate for that loss? it favour? Have you any clear idea of how it will Mr Hurd: Please give me any science behind that £5 borrow, and on what interest rates? billion. Mr Hurd: For your information, we published a strategy document. Q170 Paul Flynn: It’s the figure that is generally quoted. I would be happy to write to you— Q164 Paul Flynn: If you don’t know, please say. Mr Hurd: It’s a totally speculative number, not based Mr Hurd: It’s not a question of not knowing. I am on any evidence at all. just trying to signpost you to a document that sets out the strategy for the bank, and which will answer a lot Q171 Paul Flynn: It’s one that has been quoted to us of detailed questions for the Committee. by people who are in the business of charities. If it is The bank is designed to make it easier for social not £5 billion, what is it? Is it £4.9 billion? What is ventures to access capital, whether they are charities your figure? How much income are you taking from with trading arms, social enterprises or social firms, charities in direct Government cuts and from local but it will invest. It’s not in the grant-making business; authorities? it will invest on the basis of some economic return. In Mr Hurd: You will know that a lot of these decisions order to grow the market that it is trying to grow— have not been communicated. Some of them have not social investment, and money that’s prepared to blend even been taken; they are under discussion. What I financial return with social impact—it has to be able am trying to say— to invest for the long term, and it has to be able to take differentiated risk. Q172 Paul Flynn: If you’re disputing my figure— Mr Hurd: What I’m trying to say is that no one has Q165 Paul Flynn: Will it pay a dividend? Will it take a real number. Will it be more than £100 million? Yes, in loans? of course it will, but no one has a definitive number. Mr Hurd: No. It will be a wholesaler, because that is The Big Society Bank is a very big opportunity. We what is enshrined in legislation, and that is what the expect it to have around £600 million of capital to be market, after extensive consultation, wants. It will able to support the social entrepreneurs that Mr invest through specialist social finance intermediaries Halfon was talking about. It’s not a replacement for in the market, making it easier for them to access grants; it’s about trying to build a third pillar of capital— funding for the sector which is social finance. It is an opportunity to connect social entrepreneurs with Q166 Paul Flynn: If you don’t know how it’s going mainstream capital sitting in mainstream financial to work, what gives you any faith that charities will institutions; at the moment, they are not connected at be able to afford to borrow from it? all. There is a small eco-system of intermediaries that Mr Hurd: I do know how it is going to work. I have is trying to make this connection work, structuring pointed out a very well-thought-through and worked- products that deliver social impact and a financial through strategy document that explains a complex return. That is what we want to encourage and grow, proposition in a great deal of detail. It’s not just about without overstating it; it is a small market. charities borrowing; it’s about social enterprises accessing capital. Q173 Chair: Is there a paper on this that would help us understand how the Big Society Bank is going to Q167 Paul Flynn: Will it back those enterprises that work? There are still quite a lot of unanswered are entirely social in their aims, or those that have a questions. business or entrepreneurial nature and are likely to Mr Hurd: We published it on Monday, and it is be profitable? available on the Cabinet Office website. I’m happy to Mr Hurd: I would expect it to be able to invest across leave a copy or send you whatever number of copies a spectrum of risk. you would like. Chair: We may have supplementary questions on that. Q168 Paul Flynn: You expect, but you don’t know. Mr Flynn, do you have a final question? Mr Hurd: Let me explain. This bank will be independent of the Government, and with a locked-in Q174 Paul Flynn: Clearly, you are refusing to social mission, but its mission is to grow the social anticipate any problems with this bank. You haven’t investment market. It will exist to try to fill in the answered any of the questions raised by people when market gaps. That means that it will take risks that the that paper was published about how it is going to Ev 26 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP work. It is clearly a half-baked idea where you Q179 Robert Halfon: I don’t want it to be hijacked decided to ignore the possibility of the European by the bigger charities that are better at lobbying. Commission turning it down. Mr Hurd: I understand that point. Mr Hurd: Mr Flynn, you haven’t read the document, so you can’t tell me that I haven’t anticipated the Q180 Robert Halfon: You talked about the Big answers. Lottery Fund. Would it not be a real part of the Big Society to let people, when they bought their lottery Q175 Chair: Can I pursue that last question, because ticket, have some say on the money that went to their there is a decision to be made? When do you expect local community—so that they could choose when the EU to make that decision? they bought a ticket? Mr Hurd: We can’t be absolutely sure about that, but Mr Hurd: That is an interesting idea. The Committee our working assumption is about six months. should be aware that departmental sponsorship of the Big Lottery Fund is being transferred to the Cabinet Q176 Paul Flynn: Can I get a figure from the Office. We will shortly publish a consultation Minister? He has disagreed with the £5 billion figure. document on the future policy direction for the Big What is the figure? Lottery Fund, which has not been reviewed for some Mr Hurd: I’ve told you that no one knows for sure time. That will be an opportunity for the sector and today, because a lot of these decisions have not been interested parties to take a view on the priorities of taken, let alone communicated. It is not possible to the Big Lottery Fund. have a definitive number. Q181 Chair: Moving on, could you tell us when you Q177 Paul Flynn: Isn’t the most convincing expect to appoint a chief executive of the Big evidence you have to offer this morning that the merit Society Bank? of the Big Society has resulted from the experience Mr Hurd: We have announced that we are being you had when you were staring into the eyes of advised by Sir Ronald Cohen—a name that might be nurses? Many of us have had interesting experiences familiar to you—and Nick O’Donohoe, who was head staring into the eyes of beautiful women. Is this the of global research at J.P. Morgan, on setting up the way you reach your conclusions? bank, and they will be coming up with proposals for Mr Hurd: I genuinely don’t understand the question. its leadership. All I am trying to convey is that I looked into the eyes of two people who were absolutely committed to what Q182 Chair: When? they were doing, who, because they were freed up to Mr Hurd: Soon. deliver what they were doing in a different setting, in a social enterprise, felt absolutely great. You could Q183 Chair: Days, weeks or months? feel the change. I just left with that feeling, and I Mr Hurd: In terms of leadership, I would expect that would like more people to have that opportunity. to be weeks.

Q178 Robert Halfon: Going back to transitional Q184 Chair: Moving back to the role that we expect funds, I am still concerned that they are going to charities to play in the provision of public services, is support a charity Tesco’s as opposed to the charity it the policy of the Government that charities should corner shops. Such fat-cat charities have loads of expect to be paid less than commercial organisations money already. Is the bank designed to help those for delivering public services? smaller grass-roots charities that don’t have political Mr Hurd: No. lobbies or access to Whitehall and people like you, as the bigger charities do, so that they will have real Q185 Chair: Is that not how charities win access to funds? I am talking about small charities that contracts—by bidding less? may have tiny budgets—that funding will make a Mr Hurd: It depends on your definition of value. As huge difference—such as, dare I say it, the Balsall far as I am concerned, commissioners should be free Heath Forum and other organisations. to assess them on cost and potential impact. I don’t Mr Hurd: Please let’s not lose sight of the community think there should be a presupposition in that process first programme, which is about small grants to local that charities necessarily have to be cheaper. It is a communities, backed up by a matched endowment competitive marketplace. They often are cheaper, but scheme of, I think, £50 million of capital to try to that does not have to be the presupposition. stimulate local endowments. That is all about getting small grants to local communities. I want the bank to Q186 Chair: What do you say to charities that say be accessible to social entrepreneurs of all shapes and that the Government are trying to replace state sizes. However, its decisions will be driven by the funding with charitable giving? quality of the investment proposals put to it and Mr Hurd: The coalition Government have a stated structured by specialist intermediaries in this area. commitment to try to make it easier for charities and They exist and they are working. The document is full social enterprise to participate in public services. We of real-life examples of people structuring investment would like to make it easier for those organisations to opportunities that will be applicable to small compete, for reasons that we have stated. Alongside organisations as well. The bank has not been given a that, we have to underpin the long-term resilience and steer in terms of small versus large. It is about the independence of the sector. That is why we are putting quality of the investment proposition. a lot of effort into thinking about how we can Public Administration Committee: Evidence Ev 27

16 February 2011 Justine Greening MP and Nick Hurd MP encourage people to give more time and money in the called the Gift Aid Forum. One of the challenges is Giving Green Paper, which will go into the White that it is very broad—you go from small, grass-roots Paper. That is why we are investing so much time and charities to huge multinational organisations, such as effort in setting up the Big Society Bank as a source of charities for the arts world. They have completely independent capital for the sector. Those things move different profiles of donors and support. We got them together in parallel. all together and ran a Gift Aid Forum over a period Chair: Let’s talk about the Giving Green Paper. Mr of months. They produced a report at the end of last Halfon? year, which was very helpful. They did not propose wholesale reform of gift aid, but talked about how we Q187 Robert Halfon: What is the role of could improve the bureaucracy, because there is a Government in supporting individual charitable huge amount of paperwork. We are now taking giving? How would you define the role? forward a number of their proposals. For example, we Justine Greening: As you will be aware, tax is one are going to bring forward intelligent forms, which of the ways in which we already support charitable people can fill in online. It will hopefully mean that giving, and one of the ways we support charities. they will get the calculation right. It will be faster for Alongside the US, we have one of the most generous HMRC, and I think we should have a by-product of tax systems in the world. We gave about £3.2 billion helping us minimise fraud. You are right to flag that last year. up as an issue. It is something that we have looked at, and we are going to make sure that we get some Q188 Robert Halfon: That is still dwarfed by improvements. comparison with the US. US philanthropy is huge compared to ours. Q191 Lindsay Roy: So, Justine, it’s on the radar. Justine Greening: That’s an interesting point. If you How quickly are we likely to see that implemented? look at the world charitable giving index, a higher Justine Greening: We are already working on the proportion of UK people give to charity than in the intelligent forms. We have already responded to the US. I think you are right: one of the things we would gift aid report—I think it was right at the end of last like to do is encourage philanthropy. That is year—so we are getting on with implementing the something that the Cabinet Office and the Department outcomes of that Gift Aid Forum report. for Culture, Media and Sport are interested in. Q192 Lindsay Roy: So in time for the next financial Q189 Robert Halfon: Many charities, particularly year, or the year after? bigger ones, are not clear in their accounts on how Justine Greening: I am pretty sure that we are much they spend on administration, public affairs and working on the intelligent forms over the course of corporate affairs. Do you think that tax relief and gift this financial year for next year, but I will confirm that aid should be increased for charities that do more for the Committee. Like every department, HMRC has front-line activities, and restricted for those that spend a very constrained resource budget, but I can assure most of their time campaigning? Do you think that you that we have put resources into improving gift there should be a requirement for charities to be aid. absolutely transparent in their accounts—I am talking Lindsay Roy: Thanks. That’s a very helpful about bigger charities—and about where their money clarification. is spent? Justine Greening: I understand the premise of your Q193 Chair: It’s pretty horrific—£8 for HMRC to question. The way in which we have structured a lot process a gift aid claim. It has to be made much of our tax relief to support charitable giving is at the simpler. donor level. What gift aid does is match up with a Justine Greening: I couldn’t agree more. I signed off donation from an individual. It is their choice where that parliamentary question myself and was similarly they want to make their donation, and gift aid horrified to see the amount. It is one of the reasons follows that. why we were right to get on the case with the Gift I completely agree that the more transparency Aid Forum to look at how we can generally streamline charities can give on where they spend their money bureaucracy. I should be clear that the main driver for the better—and probably the better for them, in terms this is to reduce bureaucracy for charities, but I think of their being able to get donations from people in the you’re right: their bureaucracy ends up becoming future. I would have thought that most people would HMRC bureaucracy. Hopefully, generally want to see the money that they are giving to charities streamlining the system can be a win all round. go to the front-line cause which that charity is meant to support, rather than on administration. Q194 Chair: There must be quite a few gift aid Chair: I think Mr Roy has a question on gift aid. donations that are sub-optimal, at that cost. Justine Greening: Yes. A few donations will have Q190 Lindsay Roy: Voluntary sector groups are been made that are less than £8 but, as you can rightly disappointed by the lack of urgency on reform imagine, the overwhelming majority of them are of gift aid. Is that on the radar? Is it in your plans for more. We always need to decouple what we want to electronic filing? achieve with gift aid from the processing. Hopefully, Justine Greening: You’ll be pleased to hear, Lindsay, through the Gift Aid Forum and the helpful report that that over the course of last year, we had in place a it produced for us, we can now start to take forward group of people from all parts of the charity sector, measures to make sure that we have a way more Ev 28 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP streamlined and less bureaucratic system by which to Clearly, tax is something that the Treasury does. I administer it, going forward. have to say that, when I went back over the evidence that had been given by Tom Hughes-Hallett, he said Q195 Chair: The United States is way ahead of us. that CGT was payable on gifts of work of art, but not We have a good record on charitable giving in this gifts of shares. That is actually not correct. If you gift country, but a substantially higher proportion of a work of art to charity, it is actually exempt from income is given by people in the United States. There capital gains tax. Perhaps it will be helpful for him to is no doubt that tax relief is the main driver for read that in the transcript of my statement. charitable giving in the United States. What can we learn from the United States? Q198 Chair: I am sure he will, but what about being Justine Greening: They have a more developed able to gift your home before you die, as opposed to— philanthropic strand to their society. Arguably, it goes Paul Flynn: After you die. back to the days of Rockefeller. It is cultural, so it is Chair: Yes. We want to create incentives for people not just tax relief. I talk to people who run museums; to transfer their assets to the charitable sector, rather they know how the museum system works in the than to the Government. States and they know how the museum system works Justine Greening: You are right. We do have some in the UK. They say that, if you want to be on the incentives for people to give after they die. Of course, scene, as it were, in New York, it is really expected you are now getting me into the territory of what the that you would have made big donations to key New Treasury might or might not want to do in the future. York institutions, some of which would be art Chair: We are very encouraged that you read Mr institutions, but others would be broader charitable Hughes-Hallett’s evidence, and perhaps you will take institutions. I do not think that we yet have that culture some of those points away with you. in the UK, and it would be good if we could move towards it. Q199 Charlie Elphicke: On taxation, I used to do tax structuring for charities before I was elected, and Q196 Chair: But it is horse and cart, is it not? If the many members of the Committee may not realise tax incentives were right and, indeed, if taxes on high what happens. A charity has a business trading arm. earners were less punitive, there would be more It makes a profit. It is a business, and it gift-aids up to charitable giving in this country. There will not be a the top charity. There is no difference, in that function, culture of charitable giving if people feel that they are between that charity and Capita, when it comes to being punished by the tax system. providing local government type services on a Justine Greening: Overall, there are a number of contracted-out basis. There is no difference different aspects, one of which is getting the economy whatsoever, except that they gift-aid it up to the top back on track. If people have more money in their charity. However, that is not an abuse. Nevertheless, pocket, however much they earn, hopefully they will that top charity often spends excessive amounts on be in a better position to support charities. In terms of administrative and office expenses and does not the tax system, obviously in the run-up to the Budget, actually use that money to deal with the need that it is probably not easy for me to talk about tax in there is. Would the Economic Secretary consider a relation to charitable giving, but if we look at how the mechanism of clawback of tax relief from the gift aid US system works, it has a number of different tools in relation to all administrative and overhead that it uses to incentivise major donors. Some of the expenses, in order to encourage charities to be lean tools are quite complex. One of the advantages of the and fit and to focus on help at the grass-roots level? UK system is that, for all of the complexity or Paul Flynn: Very good question. bureaucracy around gift aid, for the individual Justine Greening: That’s an interesting point. In a concerned it is very easy. All they have to do is fill in sense, you are asking how prescriptive the a little form. Government should be. There are two basic ways in In the States, yes, there is an awful lot of tax relief at which we can get financial support to charities. One the high end. On the other hand, with that comes a is to have a scheme like gift aid, which has been huge amount of paperwork and huge complexity of incredibly successful. Last year, I think its value was the tax system for those donors to navigate. some £900 million for charities. The money then follows the donation, which has an advantage in that Q197 Chair: We had a witness before us a couple people get to decide where they want it to go. The of weeks ago, Mr Hughes-Hallett of the Marie Curie alternative is the grant system, where we simply give Cancer Care charity. He pointed out that there are money and then, perhaps, the man in Whitehall can some really tiresome obstacles, for example, in the better decide whether he thinks charities are run well. way of people gifting their houses before they die or I think we probably have the right balance, but I take gifting the pictures hanging on their walls, without your interesting comment on board. having to be punished through capital gains tax. Are those the sorts of things that you are looking at? They Q200 Greg Mulholland: Turning to the issue of are not in your Green Paper? charities and VAT, which several colleagues in both Justine Greening: Interestingly, there is a particular Houses and I have raised over the past few months, reason why tax did not feature in the Green Paper. It the Charity Tax Group has pointed out that charities is because the Treasury does tax. If we were bringing now face 10 times the amount of tax legislation that forward tax measures in relation to education, we they did 10 years ago. I want, however, specifically to would not announce the broader education policy. focus on the VAT issue as it relates to the delivery of Public Administration Committee: Evidence Ev 29

16 February 2011 Justine Greening MP and Nick Hurd MP public services, because part of the Government’s supplies is 57% of VAT. That can’t be claimed by thrust of thinking with the Big Society, which is an charities such as Sue Ryder, which runs the ideological thing in this case, is to say that we actually Wheatfields hospice in my constituency. It already want certain organisations that may be better placed delivers front-line NHS health care and is being asked to deliver those public services to do that, rather than to do more, which is very positive. So he is actually them being delivered by public bodies in the wrong in that point of view. traditional way. Yet that model, which is an There is something deeply worrying about that ideological model for public services, simply does not statement, because the Exchequer Secretary is saying add up if you say that those charities and voluntary that it wouldn’t be fair to reimburse charities that are organisations will not get the same VAT relief on non- in competition with other service providers, business supplies that, for example, the NHS currently presumably meaning private sector providers. Private can. That potentially leads to the conclusion that the sector organisations are funded by their own profits; reason why you are doing this is that if you shift these charitable organisations are funded by donations. In public services to be delivered by charities and the case of the hospice movement, more than £1 voluntary organisations, it’s a big fundraiser for the million a day is raised by people doing all sorts of Treasury. Is that why you’re really doing it? things, and without that it would not survive. It’s a Justine Greening: Greg, I don’t know how you very worrying statement, and surely it is right that managed to become so sceptical about Government those organisations that are dependent on public policy, having been here for six years. funding in the Big Society model should get, at the Greg Mulholland: We’re all sceptics on this very least, the same tax rate as the NHS, for exactly Committee, Justine. That’s our job. the same services. They should be treated in a Justine Greening: To respond to your question, first different way from private sector organisations. of all, you mentioned the NHS, and the NHS only Justine Greening: I think that what the Exchequer recovers about 20% of its VAT costs. I think you’re Secretary was referring to there was this issue of fiscal right to point out the difference that some charities neutrality, and of course you’ve talked about that. face. Of course, in part, a huge amount of what they There is an EU framework within which VAT gets do is already VAT-exempt, and, of course, the other administered, and that necessarily means that there are aspect of this is that the VAT status, for example, of limitations on charging different VAT rates to different local authorities and the NHS ends up getting taken providers that are providing effectively the same into account when we make their funding settlements services. In many respects, charities get a number of in the first place. As the landscape around public exemptions. For example, there is a zero rating on the service delivery changes, and as charities get more cost of advertising, and clearly if you were running a involved, it is a fair point that we have to make sure private company you would say, “We have to pay VAT that there is a level playing field. That is one of the on our advertising, so why don’t charities?” reasons why we are consulting about how we can look I reassure you that a lot of tax relief does go through, at this whole issue of VAT and shared services and not just to people who have donated money by gift back-office services, which is something that charities aid but directly to charities; for example, they pay do raise a lot. significantly reduced business rates. Last year, £3.2 First of all, this shift around public services and billion went through directly to support charities, charities getting involved is not at all to do with either through the donations people made, or through raising more VAT; it is about letting charities be part reducing their cost base or giving them relief on of provision in a way that they have wanted for many various areas of VAT. We are absolutely keen to make years, but they have often felt thwarted by sure that we use the tax system to support charities bureaucracy and a lack of freedom. On the second, and charitable giving, and I think that most tax experts broader point, you’re right to say that we want to would recognise that alongside the US—we’ve talked make sure that charities can compete, but as Nick about the US and we obviously look at it to see where Hurd has often said, while local authorities do of it is doing better—the UK would be held up as a good course increasingly look at cost, quality is a key issue example of a tax system that supports charities, and for them, too. we want to make sure that we continue to do that. In fact, as I was saying to Lindsay earlier, we want to Q201 Greg Mulholland: Thanks for that. People look at what we can do with key taxes such as gift would think it quite perverse that this transfer of aid, to make them work more effectively. public services would lead to a new revenue stream for the Treasury, and that’s something that needs to Q202 Greg Mulholland: I appreciate that there are be addressed. tax breaks, but that doesn’t deal with the question of You talk about a level playing field, and I just want to these organisations being asked to deliver public quote from a parliamentary answer in the Commons services that are currently being provided in a public by your colleague, the Exchequer Secretary. He says: way, and that needs to be addressed. “nor would it be fair to reimburse those charities Justine Greening: They’re not being asked to do that. which are in competition with other service providers”, which suggests that there should be a level Q203 Greg Mulholland: No, but the thrust of the playing field. That’s a flawed statement, because the Big Society is that the Government are saying, and I whole point of this argument is that there isn’t agree—some colleagues might not—that currently a level playing field, and I have to reiterate organisations such as Sue Ryder that are specialists that the figure that the NHS can claim on non-business are probably better placed to deliver. However, they Ev 30 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP need to be given the environment in which to do so. David to discuss that, but I am sorry to say that the The Government are prepared to look at this issue Government will have to look at it or, simply, they when it appears to suit their ideological leanings. I will not be able to deliver the Big Society vision. If refer, of course, to the announcement of the £275 we could have a chat, too, I would appreciate it. million tax exemption that they have decided to find Justine Greening: I would be delighted. Indeed, I for the ideological and controversial academy schools have had that discussion with charities who have initiative. Again, there will be very different views, come into the Treasury. even around this table, about whether that is a good thing for education. How can the Government Q205 Greg Mulholland: I also point out that I do possibly give a tax break of that amount for a model not think that there would be many people in this of a school—which will be competing with other room who would donate to academy schools, so I am forms of schools, including public sector schools— not sure that you have dealt with that analogy. There when they cannot do the same for the hospice is lots of good fundraising, but I am not sure that that movement? That movement delivers end-of-life, is an example of it. front-line care for people who are suffering and dying Justine Greening: That may be your particular from conditions such as cancer, motor neurone preference and, of course, different people want to disease, and all the other awful terminal diseases. To support different institutions. I know that down the some people, that seems an extraordinary set of road from me in Battersea, parents are determined and priorities and even a little bit appalling. Is that not very keen to set up an academy school because they something that you are concerned about? think that it could be excellent for the education in Justine Greening: I have to say that I don’t agree their area, so they may well want to support it. with you at all. I think that this Government is really The whole point about charitable giving and what we determined to support charities through the tax have tried to support through things such as gift aid is system. We all know, from our constituencies and that people get to make their own choices and it is not from charities that we no doubt support on a personal dictated by politicians in Westminster, who may feel level, the wonderful work that they do. We know that they know best. about the volunteering that people add into that. We have an amazing country in many respects—people Q206 Paul Flynn: Volunteering. The previous give a lot of money, the percentage of which is Government had a year of volunteering—that was comparable with other countries. They give a huge Labour’s Big Society. In that year I tabled a written amount of time as well. question to every Minister asking them what they The Government provides an awful lot of support would do to volunteer in that year. Now that we have through the tax system to support all those charities, passed year zero and are on the long march, we have including fantastic ones like Sue Ryder and Marie seen the fine example of Lord Wei, who is leading by Curie, which we heard from earlier. We get them into example, rather than just exhortation, by announcing the Treasury, which is one of the reasons why, having originally that he was going to give three days a week done the Gift Aid Forum, which we found a very useful process, we wanted to continue that to volunteering. How many days a week will you conversation. So we now have a Charities Tax Forum two give? that can look more broadly at the charity tax system Justine Greening: A week? to see what we can do to help it. I appreciate your Paul Flynn: Yes. A week is what he said. frustration about that particular example, but I Justine Greening: In terms of what I do in my local reassure you, Greg, that we are doing our level best community, I am a school governor at Hotham to see how we can make sure that the tax system primary school. I was delighted to agree to be— works for charities. having been asked—a school governor at Elliot, We are necessarily constrained, because, as a which is a secondary school in Putney. I am also a Government, we have come into office at a time when patron of Wandsworth Arts Society. Like many MPs, it has probably never been harder to find any more I spend an awful lot of time doing my best to support money for any aspect of Government policy. We have local organisations across the board, whether it is picked up a record deficit that is costing us £120 going down to the Lennox estate over the summer to million a day—that is money that most people would support their Help for Heroes fundraiser and so on. much prefer to see go to fantastic things such as supporting charities through the tax system, or public Q207 Paul Flynn: We’re all in that position, as services. We are not in the position to do that. Members of Parliament. Are there specific days that Nevertheless, we still want to ensure that we make you can say are allocated for volunteering? That was the tax system work effectively in supporting not only the point that Labour was making on the Big Society. charitable giving, but tax relief to charities directly. Chair: Most of us would consider politics to be a Chair: That was a very full answer. vocational, volunteering profession. Justine Greening: What I would say, Paul, is that Q204 Greg Mulholland: Justine, you said that you volunteering is important. Although I know that all of did not agree with me, then you entirely evaded the us MPs have busy lives, even now, I am still trying to content of my question. May I be clear? Charities do more and more in my local community. don’t want charity—that is what you are suggesting and that would be difficult in the current climate; they Q208 Paul Flynn: I just question whether you see it want a level playing field. I have a meeting with as a leadership role. I could tell you the answers that I Public Administration Committee: Evidence Ev 31

16 February 2011 Justine Greening MP and Nick Hurd MP had from the previous Government, which were rather Mr Hurd: I do not want to get drawn on that, because different from yours. I have a great deal of respect for Dame Elisabeth. She was reflecting a great deal of anxiety, frustration and Q209 Chair: Why do you think that volunteering in insecurity, because we have to face the fact that people this country appears to be so much less than in many out there feel the risk of losing things. People don’t other countries? like losing things. We have to respect that and I do Mr Hurd: If the point that Paul is making is about the not want to get drawn into any accusations that these importance of leadership, I totally agree with that. My were politically motivated. reply would be very similar to Justine’s. Q216 David Heyes: I want to pick up a point from Q210 Paul Flynn: You won’t be giving specific the Giving Green Paper, which we skated over earlier. days? There is mention in here of the role that the honours Mr Hurd: I give a lot of time, beyond being a very system can play in encouraging philanthropy and busy Member of Parliament, spending every day recognising philanthropic acts. helping people. Chair: I’m bound to say that a letter from the Minister would not do it for me. Q211 Paul Flynn: Could we look at the expectations Mr Hurd: It wouldn’t do it for me. that you are asking of other people, for example, with this National Citizen Service? I have looked at what Q217 David Heyes: I wouldn’t be impressed by that it is supposed to do. It is supposed to play an either, I must admit. I wonder whether you ought to important role in building social cohesion, by creating be looking at doing some more to encourage this. The new connections between young people. Young point is made in the Green Paper that there is a limit people are very skilled at building new connections on the number of honours that can be awarded. As I between other young people. understand it, there is no specific category in the Justine Greening: You seem very sniffy about honours system for philanthropy. Is that something volunteering, if you don’t mind me saying so, Paul. that we need to encourage an expansion of? Possibly Paul Flynn: Let me go into this— we could do so at the expense of reducing the honours Chair: Let her answer the question. that seem to go to—well, let’s pick on civil servants and other time-servers. Q212 Paul Flynn: I haven’t asked a question yet. Chair: And politicians. You are going to build new connections between David Heyes: And politicians. Indeed. young people. Young people are very skilled at Mr Hurd: Yes. Let’s recognise and value the givers forging connections with other young people. It is much more than we do as a country. Of course, some called the mating instinct. They do not need this. Why people, like the person who is the biggest giver in my on earth do you regard this as an objective to be constituency, do not want any recognition at all and pursued? Is this not just pious drivel? How can you we should respect that. However, the answer to the expect young people to give up a year working for general proposition—“Can we do more to point to nothing, when you are not prepared to give up a day giving, to recognise giving and to thank people for working for nothing? their giving?”—is, “Yes, absolutely”, and there are Mr Hurd: I wish you could meet the young adults various mechanisms to do that. that went through the pilots this summer, because if you had, Paul, you would have heard them address Q218 Kelvin Hopkins: There is an area of human that exact point. They said that one of the reasons why life that is entirely appropriate for volunteering. I can they absolutely loved the experience that was offered think of religious organisations, football and sports to them was that it was a chance for them to meet clubs, scouts and guides, political parties and so on. people that they would not otherwise have met. What We are all involved in a number of voluntary bodies they value is coming together. of that kind. But then there are vital public services, such as looking after damaged children or caring for Q213 Paul Flynn: Where were the pilots? elderly people with dementia, which have to be Mr Hurd: They were in London, mostly in west publicly accountable. Isn’t the idea that voluntary London. Hammersmith was a particular focus. Some groups or charitable groups should undertake those 600 young people took part. public services trying to send us back to the 19th century? Q214 Chair: Is there a note that you can send us on I must say that my own overriding feeling about the that, because we are running rather short of time? It Big Society is that it is yet another attempt—in a would be very useful. process that really started, going back 40 or 50 years, Mr Hurd: Absolutely. with von Hayek—to dismantle the modern state and drive us back into a world where we are much more Q215 Robert Halfon: Do you think that some of the dependent on ourselves, business and the private attacks on the Big Society have been politically sector, and taking away from the democratic state. motivated? When Elisabeth Hoodless did this, little Justine Greening: I’m sure Nick will have something mention was made of the fact that she was a long- to say. However, I think that the Big Society is not at standing member of the Labour party, for example. all what you just described. It is about recognising She was presented as one particular voice. Or do you that charities play a major role in people’s lives and think that it is a mixed bag? what charities have been saying is that they feel that Ev 32 Public Administration Committee: Evidence

16 February 2011 Justine Greening MP and Nick Hurd MP they can play a broader role still. I think that the huge of private cash given to charities, whereas in the US frustration that many of them have had in recent years the equivalent figure is 5%. The Government seem to is that, for various reasons, it has been difficult for be arguing that red tape and lack of information are them to play that broader role. the key obstacles. What are we going to do to get rid Part of what the Government are doing is giving of the red tape and give better information? charities the option and the choice to be able to play Justine Greening: You’re asking me once again to a broader role, but of course that must be done in a stray into the territory of what the Treasury may or way that still has the accountability and that still has may not do in the future, but what I can tell you is local authorities commissioning and having contracts that through corporation tax, we currently give about in place. £500 million in tax relief to companies that give to Perhaps for some of the people who, for example, may charity. So we have some incentives for companies to end up being part of service provision and who give to and work with charities. I think you’re right themselves are involved with charities in a way that to say that the Big Society is not just about getting means that they themselves are able to volunteer and individuals involved; hopefully, it’s about getting get work, so that they can then potentially become corporations and companies involved, too. part of service provision, perhaps in the long run it will be seen as a real way of joining up our Q221 Chair: Finally, it is not directly in either of community far more cohesively than we have been your portfolios, but a great deal of the extra regulation able to do in the past. Perhaps the best thing is for that’s piled on business, particularly employment charities to deliver some of our public services where regulation, applies to charities. What small businesses they want to do so and where the local community complain about, charities complain about. wants them to do so. Obviously, Kelvin, from the Mr Hurd: Exactly. Labour party’s point of view, I would have thought that the fewer private sector companies that we have Q222 Chair: Are you joining the push, for example, doing this, maybe the better for you. I think that it’s to reform employment tribunals, which afflict about choice and about giving charities options. charities just as much as small businesses? Mr Hurd: I agree completely with your premise. Q219 Kelvin Hopkins: There is a second part to my That’s why we set up a joint taskforce with BIS to question. Is it not inevitably a drift towards the private look at red tape on small organisations, whether they sector, because many of these voluntary sector be businesses or civil society organisations. It’s being organisations and charities will actually fail in the end, led by Lord Hodgson, and he’s due to report to me and it will be down to the private sector or indeed the within the month with practical suggestions on things state? That will be the real choice, between the private that we can take away. sector and the state. Boy scouts will still be run on a voluntary basis, but when it is provision of public Q223 Chair: Which would apply to small businesses services it will either be private sector organisations, as well? including private hospitals for the wealthy who can Mr Hurd: Exactly. afford them, or public provision. Justine Greening: The key, Kelvin, is that we are Q224 Nick de Bois: Notwithstanding some of the giving local authorities more power. So it is up to misgivings represented around this table, would you local communities to decide who will provide their agree with me that once Government have set the services, and how. Transparency is key to that. The levers and done their leadership role, the ultimate test more transparency we have locally, the more people for the Big Society is going to be when we see how can make their own decisions. I am sure, Nick, that much take-up there is from the public responding to you have some comments on this. the challenge? Mr Hurd: On your concern about accountability, Mr Hurd: Yes. Justine has talked about accountability commissioners Chair: Thank you both very much indeed for your and accountability to people using services. But time this morning. It’s been a very full session, and accountability will be made so much easier by the fact you’ve given us a great deal. We may well have that the world will change in terms of transparency further questions you can help us with in writing. We and information that is available to the public about are going to launch an inquiry into the Big Society, grants, contracts and everything that the state is doing and that announcement will be made formally later in our name. That is one of the big changes that is today. Obviously, the evidence that you’ve given us being added. today will be very much the foundation of our work. Thank you. Q220 Chair: May I ask about corporate giving? Corporate donations in this country make up only 3% Public Administration Committee: Evidence Ev 33

Tuesday 3 May 2011

Members present: Mr Bernard Jenkin (Chair)

Nick de Bois Robert Halfon Charlie Elphicke Kelvin Hopkins Paul Flynn ______

Examination of Witnesses

Witnesses: Sir Sandy Crombie, Senior Independent Director, Royal Bank of Scotland, Robert Mirsky, Head of Hedge Funds UK, KPMG, Martin Brookes, Chief Executive, New Philanthropy Capital, and Chris Blackhurst, City Editor, London Evening Standard, gave evidence.

Q225 Chair: Welcome to this session of the Public perhaps it was the tax system—there certainly are Administration Select Committee. I hope you will some easily identifiable benefits in the US, such as forgive us that many of our colleagues are busy in direct tax deductions and things like that, that, frankly, other parts of the House at the moment and we may I did not understand worked quite well here too. In have to interrupt this session while somebody leaves fact, I actually had a conversation with one of my and then somebody arrives, but I am most grateful for personal tax partners here to say, “What are the your indulgence. This is a session about the big differences?” He has dual nationals, and said it is society and charitable giving. I wonder if you could actually easier for them to make charitable donations each identify yourselves for the record. here. At the end of the day, I do not think it is a Sir Sandy Crombie: I am Sir Sandy Crombie. Today discussion around tax; I think that there are cultural I am representing the Royal Bank of Scotland, but I differences between the countries, whether it is can talk of other experiences if that will be helpful at because the society there deems it necessary to do any stage. that; I was raised to believe, “You must do this; you Robert Mirsky: I am Robert Mirsky; I am a partner at must give back.” I do not know if it is the same. KPMG. I am also the founder of the charity Hedge Funds Care. Q227 Robert Halfon: Is it because maybe taxation Martin Brookes: I am Martin Brookes. I am the Chief is higher and the state is bigger here, so we are less Executive of New Philanthropy Capital, which is a inclined to give philanthropically? charity that does research about charities and advises Robert Mirsky: Certainly, I feel that what I have donors. noticed here in the work we do—my charity focuses Chris Blackhurst: I am Chris Blackhurst. I am City purely on the treatment and prevention of child abuse Editor of the London Evening Standard and I also sit in the UK—and from conversations I had with people on various charity and arts boards. about our grant-making going to charities that do pick Chair: Thank you very much indeed for joining us. up slack where Government cannot manage to do what the expectation is that it will do, is that people Q226 Robert Halfon: May I just apologise that I push back quite hard. They say, “No, this is have to leave very shortly to go to a debate on Government’s responsibility; it is not our childhood obesity, which is a big issue in my responsibility to do it,” and I certainly get pushback constituency. I do apologise to you for that. I just want there. to ask you a couple of questions about philanthropy: Chair: Do any other witnesses want to come in on could you just give me your views about why that? American philanthropy is so much bigger and larger Chris Blackhurst: May I just say on the American than it is over here in terms of giving to charities and difference that perhaps they are at the same stage that voluntary groups and foundations? we were in the Victorian era; we then lost that Sir Sandy Crombie: It is never wise to volunteer, intervention when we had far greater public funding, perhaps, at these things, but it is just speculation on the welfare state, etc. Their industrialists do have a far my part: I think in the US there is a great deal of greater sense of duty that perhaps we had back in the expectation that you will look after yourself; the state 19th century or the turn of the century. When you go does rather less. Therefore, I think there is just to universities you see these boards of great names perhaps more of an expectation that if you can give, that gave money and they did it out of a sense of duty you do. My understanding, though, in the US is that of putting something back. Somewhere it has got lost. quite a large proportion of monies given go to I do not think it is just taxation; I think we are a bit education, or the higher end of education, and fixated on the tax benefits, although they do have religion. So it is not clear to me that the benefits are them. felt in the more difficult areas of society just because overall more money is given. Q228 Robert Halfon: Why do you think we have Robert Mirsky: I think I am the only American on the lost it here? panel, so to me, certainly in setting up a charity in the Chris Blackhurst: I think we lost it because of the UK, there were cultural differences in looking at growth of the welfare state and growth of public doing things here versus there. Initially I thought funding. If you look at the American system as to Ev 34 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst where their money goes, I think it was just said earlier, proportion of giving by rich people versus poor an awful lot of their money goes to education and people; the concentration of wealth in a small number healthcare. In our society that has been lost and we of very significant institutions that could do so much just do not do that. more, both directly and in terms of encouraging their staff. So I think an overwhelming yes. Q229 Robert Halfon: Do the budget measures go some way to address that? If not, what other measures Q232 Chair: The bankers in particular are in the would you put into place to try and increase category where they have made their money rather philanthropy? than inherited it. Yet, as a proportion of their income, Chris Blackhurst: I think they go some way; I do not the impression we get is that they seem to give rather think they went far enough. I think the one thing the little. In fact, Mr Brookes, you have written, “Perhaps Americans do that we do not have, as I understand it, bankers do not feel a sense of duty and responsibility is lifetime giving. That lifetime giving means you can towards charities and the causes they tackle,” though give to a charity and whatever you give is ring-fenced you add, “I refuse to believe that bankers are less from future taxation. That is a huge benefit and that moral than the rest of us. We all seem to feel rather allows you to develop a relationship with a charity. limited duty to charity, as low levels of giving overall One of the complaints that charities make here is that suggest.” How do we tackle this less than moral we only give when we are dead, and you cannot really outcome from these otherwise probably perfectly have a relationship with a dead person. Whereas, if respectable people? you say to a charity, “I want to give you £1 million, Martin Brookes: I think we should actually talk with £500,000, £5,000, £50”—whatever—they can develop them and engage them in dialogue about what they do a relationship with you; they can get to know you. for charitable giving and whether it is enough, and You can go to events; you can start having a whether they could do more. We could just harangue relationship, or a friendship, and in America they do them, but I am not sure that is very purposeful or that. productive. So I think talking to them about how they Martin Brookes: Without taking issue with anything encourage their staff to give, how they match-give that has been said, I think just a couple of things are what their staff might donate, how they match-give worth highlighting. One thing that they have in the what their staff might fundraise. I think there are US that we do not really do very well here is very purposeful conversations that could be had with the visible giving. There is a lot of research that shows banks, whereby you could get to a better that if I give and I give publicly, then you are more understanding of what the barriers are to them doing likely to give. That way of doing it we find sometimes more. Then, eventually, you may reach the point a bit garish, but very visible public acts of giving are where you decide that they are less moral than the very valuable in terms of creating a culture in which rest of us, but I think that I would want to defer that people give, so I think that is important. They also conclusion and try a number of things before you get have far less inherited wealth than we have, and there to that rather pessimistic point. is lots of research that shows that if you inherit your Sir Sandy Crombie: This conversation has morphed wealth, you are markedly less inclined to give money away a little bit from your starting point, which was away than if you have made your wealth yourself. the financial sector, to perhaps individuals who Chris Blackhurst: I would like to add one thing to happen to work within the financial sector. I do not that as well that I think we overlook. Certainly in the think the two should be confused. Companies last decade for people who give, particularly who give operating in the financial sector are really no different large amounts, the tendency—and I would say this from any other company; they have to justify what wearing a media hat—has been slightly to wonder, they do. If you wanted a view on whether companies “What are they after? What honour are they after? Are could generally do more, I would say yes. I think they after a peerage? Are they after a knighthood? companies could be better citizens as companies, and Why are they doing this?” That has created an I think they could do more to encourage the unhealthy atmosphere in society. individuals who work for them to give more as individual citizens. In that sense, I would agree that Q230 Chair: We will come back to the peer effect of more could be contributed generally. I would not want giving and how we can encourage that later on in our in a sweeping way to say that only one sector could cross examination. However, I wonder if I could ask give more. a slightly obvious question: should the financial sector Chair: I think we all agree with that. be donating more money. Sir Sandy Crombie: Companies generally could Chris Blackhurst: Do you want an obvious answer? contribute more, but they always have to justify what Yes. they are doing. Internally, they have a rationale for what they do because ultimately the companies are Q231 Chair: Yes. And does the panel agree with owned by shareholders or they are responsible to that? Nobody disagrees with that? members one way or another. Sir Sandy Crombie: Yes. Robert Mirsky: I think every sector of society should Q233 Chair: I should point out that His Grace the be giving more. I do not think it is solely focused on Archbishop of Canterbury has argued that most the financial services sector. wealthy financiers should be required to volunteer. I Martin Brookes: I think it is an obvious place to look do not know how we would achieve that. Mr at in terms of where wealth is concentrated; the Blackhurst? Public Administration Committee: Evidence Ev 35

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Chris Blackhurst: I would disagree with His Grace decades, and perhaps for longer, marketing themselves the Archbishop of Canterbury—I do not know to wealthy donors. You see evidence for that when whether I am allowed to or not—because, as has just you talk to individual charities about the profile of been said, I do not think you can single out bankers. their donations and how many big ticket donations Bankers are put upon enough as it is. If you single out they get. They tend to get very small five- or six- bankers you lead to a whole slew of arguments about figure donations. In the last decade you have seen a whether they should relocate offshore, whether they number of charities start to recognise this and start to are being singled out. I think generally all companies invest in so-called high-net-worth fundraisers. and all wealthy people should be encouraged to give However, the fundraising industry generally is not more. Within that, obviously that includes banks and very good, frankly. We just do not have a very high other people in the financial sector. Why just banks? quality fundraising sector in Britain. It is not just me Law firms, accountants, they are full of wealthy saying that; the former head of the industry of people. fundraising would say that. There is a dearth of In order to encourage them to give more, several quality fundraisers in the UK, unlike in the US. things need to happen; a mechanism needs to be put Unless you get better quality fundraisers, it is quite in place. To come back to the Archbishop saying that hard to make pitches to the sort of people that Chris they ought to be required, if all companies had a describes—the sort of people that Robert knows as dedicated charity director, if they had a section in the well in hedge funds—who are used to high-quality annual report that this person had to take professional services. It is very easy and perfectly responsibility for, and actually had to say how much legitimate to criticise the financial services industry they give to charity, which charities and why, that for not giving more; I am very happy to do that. would change things immediately. It would cease to However, charities have done a very poor job at be just a paragraph in the Chairman’s bit, which is marketing themselves, presenting themselves and often their own pet favourite. I would like to see the reaching out to wealthy donors. I see every week charity sector get more efficient. If you are asking when we talk to charities about presenting to donors wealthy people, who by definition are successful, where we are advising, we are often having to say to efficient, entrepreneurial people, to give money to them, “Do not do it like this. Do it like that. This is charity, you cannot just expect them to give willy- really poor quality. Can you provide something more nilly. I think the charity sector themselves have to efficiently, higher quality, more timely and so on?” So show increased efficiency. the problem rests partly with charities as well as with wealthy donors. Q234 Chair: What role should charities themselves play in promoting philanthropy among this group? Q236 Chair: Is it because some charities—how shall Are charities particularly good at it? Mr Mirsky might I put it—are evidently of a different philosophical have a view about that. persuasion than many people who earn large sums of Robert Mirsky: Just to relate back to your earlier point money, and people who feel that charities are for a second about the assumption that bankers and campaigning against the system that is producing the those in the financial services sector do not, as a wealth might find it quite difficult to give money to whole, give enough to charity, from anecdotal people who share very different values? experience and from my experience with Hedge Funds Martin Brookes: Sometimes. It can play a role, but I Care, there has been significant growth in what we do. think that can often come across in the form of a Every year our revenue has continued to grow as we problem of language, for example—that they use get more support from the hedge fund industry in different languages and have different expectations of particular. There are many individuals with whom I how to manage relationships and so on. So it is partly work in the hedge fund sector who give not only ideological, but it is partly to do with the practicalities money but time. I was spending a day a week out of of how these two sides do business. a work week getting the charity set up. I was not alone Chris Blackhurst: If I could just interject, I think all in setting up the charity. So I believe that your charities should be required, almost as a matter of law, question is: what else can charities do to be to declare on the front of their blurb what percentage encouraging more involvement? Is that right? goes to the charitable purpose and what percentage goes to expenses. That ought to be required and it Q235 Chair: How can charities market themselves should be publicly there. I would like to see the better? Charity Commission being far more proactive in this Robert Mirsky: Again, Hedge Funds Care in area. particular is a charity that does also serve the purpose, Chair: The Charity Commission’s job is to ensure I hope, of reflecting the philanthropic values of the that the money is used properly, but I hear your hedge fund sector to prove that there is something suggestion. being given back to society, to our community. So we do spend time speaking with people in our sector and Q237 Charlie Elphicke: Just a supplementary on also those in the charity sector to help them that, Mr Blackhurst. Do you think that there is a understand what we are doing and why we are doing problem that too many charities talk the talk rather it. There is an active marketing campaign that takes than walking the walk, and that their propensity to place alongside what we do to raise money. campaign rather than get on and do the work of Martin Brookes: Can I chip in there? I think charities engaging in the need causes a lack of trust and puts have done a very poor job in the last couple of donors off? Ev 36 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Chris Blackhurst: Yes. My perspective, and it really responsibility. So they are giving time; they are is only a perspective, is that there are too many giving access. management charities. I think it is baffling. I cannot remember the figure, but if you look at the number of Q241 Chair: So your message is that the culture is charities devoted to cancer the figure is enormous. improving? There are just far too many. I hear what has been said Robert Mirsky: That is my belief, yes. about the Charity Commission, but I would like to see the Charity Commission behaving as a proper Q242 Chair: Well, you seem to be evidence of that, watchdog. I would like to see it almost like the certainly. Financial Services Authority or Ofcom for the charity sector. I would like to see its people going in, I would Q243 Kelvin Hopkins: Bankers have been in the like to see it giving marks and I would like to see it news a lot in the last two or three years, and with forcing consolidation. There is a ridiculous number of good reason but, as you say, bankers are not the only charities; why does the Charity Commission not say, rich people and some of you have been suggesting “We think you should merge”? It just does not seem that many other rich people have not had the same to happen. focus. However, is the recent new emphasis on philanthropy simply a smokescreen or fig leaf to take Q238 Charlie Elphicke: When charities abuse their attention off the bankers and their bonuses, and position, too often the Charity Commission is a bit of haven’t they continued to get away with it? a paper tiger, isn’t it? Martin Brookes: I am not quite sure how to respond Chris Blackhurst: Yes. I think we are all familiar with to that. I do not think there is an intention that cases where there is fraud and somebody has been philanthropy is an attempt to detract attention from stealing out of the tin; there are those cases, but bankers and the responsibilities of bankers. I think generally they do not seem to be taking an overview there is a genuine growth in the idea of philanthropy of the sector and looking at how it can be improved. and what it means, and I think that goes hand in hand Chair: Anybody else? with a growing proportion of wealth being made Robert Mirsky: Donors have a responsibility as well rather than inherited, with a lot of wealth in absolute to ensure that the money they are giving, and I think terms being made and—notwithstanding the events of Martin would probably agree with this, goes to the last couple of years, that is still the case—of many charities who are working in responsible, efficient and people making wealth very young, of there being effective ways. Charities themselves I think can some very prominent examples of people giving away operate, assuming they have a reasonable charitable lots of money, such as in the US. purpose, and in my opinion there can be as many So I do not think that philanthropy has been created charities as you want. as a smokescreen. I certainly would accept that there have been times when the rhetoric around Q239 Chair: That is where an employer has a philanthropy and what is being done by wealthy specific role, isn’t it? If an employee says, “I want to people has been exaggerated and hyped, and used to take an interest in such and such a charity, but I want try to offset some of the criticisms being made of to give it some time to find out how they spend their bankers, but I hope that is a meaningfully different money and help them do better,” that is where an perspective. My organisation, with the word employer needs to say, “Right, we will give you time “Philanthropy” in its name, was not created by off to do that,” or “We’ll make allowances in your bankers to make them look good in anticipation of hectic 90-hour a week schedule in order for you to be them being criticised in the future. It was a genuine able to do that.” attempt by people who had made a lot of money to Robert Mirsky: I certainly think that charities should try to improve levels of charitable giving and where have information disclosed that would make it easier charitable giving was done. It might get raised for employees— occasionally as an example of why bankers are okay; Chair: No, I am asking a different question. It is it is not an example of why bankers are okay. about the role of employers giving people the time So I think the construction of your point is flawed, to find out about those charities, to be involved in while I have some sympathy with the idea that those charities. philanthropy is sometimes used—wrongly—as an Robert Mirsky: I think it would not be unreasonable excuse for bankers’ behaviour. for employers to give— Chris Blackhurst: I would just add to that. I do not think we should get into a debate as to why people Q240 Chair: But in your experience are employers give; it is one of our failings. Why do bankers give? under pressure? We know that the financial services If they give it for good PR, what is wrong with that? sector is a very pressurised sector where people burn The fact is charities benefit. We could argue forever out because they are so hard worked. Do employers about whether they are doing it as a smokescreen instinctively give the time for that sort of thing? because they are earning tonnes of money elsewhere. Robert Mirsky: In my experience with the companies As long as they give more, who cares? with which I have worked, the corporate and social responsibility programmes are significant programmes Q244 Kelvin Hopkins: The tenor of some of your for us. There is a genuine interest and a growing comments so far is why the rich in Britain do not interest, I think, in ensuring that the businesses do give actually, compared with America. Maybe I am undertake appropriate corporate and social cynical; maybe I am just a realist, but isn’t the real Public Administration Committee: Evidence Ev 37

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst threat that the Governments might one day start to one of these extras for which charitable support I think raise taxes on the rich a bit, and rather than have taxes is appropriate. you would like to have this culture of apparent Chair: I think it is a point, not a question. philanthropy—a little bit of giving—to deflect Kelvin Hopkins: I am deeply sceptical about the Governments from raising taxes on the rich? whole idea of philanthropy being a substitute for Martin Brookes: As the Chair has quoted me, I am public services paid for out of general taxation. not an apologist for bankers. I was once a banker Martin Brookes: Who says it is? myself, but I am not an apologist for bankers. The Kelvin Hopkins: I was asked, as I say, by a local idea that the people I work with and talk to give or public service for something that is absolutely want to talk about philanthropy as a way of offsetting essential for human life at a particular age, and I or minimising in some way is patently absurd. It just thought it was wholly inappropriate to be asked. That does not hold any water at all. The people I talk to should be paid for out of taxation, and the taxes and who set up my organisation want to give in order should be paid for proportionately so the rich pay to achieve things with their money that they have more and the poor play less. made. It begins and ends there. There is no sub- Chair: I think Mr Brookes has dealt with that point agenda; maybe for others, but I certainly do not see it. by saying that— Kelvin Hopkins: I shall come back to that. Q245 Kelvin Hopkins: We have not seen very many figures in terms of the actual donations of wealthy Q249 Chair:—there are certain things the state does people to charity—I have not anyway—but compared not do very well, or there are certain things the with a small increase in taxes on the rich, the amounts voluntary sector does extremely well that the state involved are very small indeed. cannot substitute for. Moving on, can I just ask, just Martin Brookes: And all philanthropists make to deal with this question about Project Merlin, was precisely that same point, including Bill Gates on the anybody on the panel involved in Project Merlin or Today programme when he was in the UK recently. have knowledge of Project Merlin? Was there a He decried the idea that philanthropy could be the conversation with the Government about the solution to global problems. He said it could pump- prime models and so on; it could be very valuable, relationship between Project Merlin and philanthropic but it was not a solution; it was not a replacement for giving of the sector? Sir Sandy? the state, and that is the biggest donor in the world Sir Sandy Crombie: I suppose I should claim some saying that. I have only ever met donors making that knowledge, but obviously I was not personally point. involved in the detail of the discussions. Merlin is a two-way agreement. It was offered by the banks to try Q246 Kelvin Hopkins: I make a simple point that to calm the situation, to try to get a Government for vital public services, the state has to have the main engaged in ensuring that there is a level playing field role in taxing and paying for those public services. for British banks to participate in business and Martin Brookes: I know of no philanthropist who commerce in the future without being unduly would disagree with that—not a single one I have disadvantaged. In return, I think what the banks have ever met. offered is to ensure that their contribution to society will not be diminished, so each of these major banks Q247 Kelvin Hopkins: But there is a legitimate role will ensure that they will not give less or contribute for giving, in essence, for the extras that it is not vital less in the future. Then it was the contribution into for the state to provide. the Big Society Bank, so-called, to ensure that that Martin Brookes: But some of those extras are actually particular avenue of things could be funded. very important—developing a cure for malaria, for example, or trying to conquer TB. There are lots of Q250 Chair: We will come to the Big Society Bank things that the state does not do or does not do very a little later in our questions, but you mentioned the well: creating ways of helping teenage girls who are big society. Can we just deal with another elephant in facing sexual exploitation, which has been a big issue the room? A great many people somehow feel that in this country recently, is basically being funded these huge bank bonuses are really not compatible privately to a significant extent, not entirely. So with the kind of caring/sharing society that we really philanthropy has a very valuable, important role to want to be living in. There are people who take these play alongside the state. big bonuses and just take a vast majority of it home and do not give philanthropically; this is not right and Q248 Kelvin Hopkins: We could debate the interface this leads to the Archbishop of Canterbury perhaps between what is appropriate for the state to provide. feeling as strongly as he does on this matter. How do Recently I was invited along to a local, major public you as someone in sector or, indeed, someone in the service organisation, and I thought I was going talk hedge fund sector square the big bonus culture with about the provision of services but I was actually the big society? asked if I knew any millionaires who could make Sir Sandy Crombie: I think personally it is to confuse some contributions. Being a Labour MP, I do not two issues. What the Board of RBS are trying to do, know many millionaires, I am afraid. The one I just as one example in this particular sector, is bring mentioned who I did know had already given. So that back to health an institution in which the country has was it, but this was a public service. It was not indeed a major stake. Ev 38 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Q251 Chair: But the culture of this investment that they could make because their time is arguably banking climate is that you have to pay these very better spent generating more money and building up large bonuses, and that sticks in the craw of a lot of the economy? ordinary people, and they cannot understand it. Robert Mirsky: There is quite a lot that we do, again Sir Sandy Crombie: We are not unaware of that. with the charity that I am involved with, that uses the skill set that we have gained and learnt in financial Q252 Chair: But how do you morally square this services: leverage, the ability to identify good circle? businesses, solid opportunities and to undertake joint Sir Sandy Crombie: What we are trying to do is ventures. All of that skill set that we have learnt rebuild value in the Bank. The country has contributed through the normal course of our activities we then £45 billion, at 50p per share equivalent, into this Bank take and use within the charity to make that charity to keep it alive and give it a future. What we are trying more efficient, to help us grow funds and be able to to do is put that value back in the Bank. Currently the make further grants of funds. So I do not think it is market values the shares at 41p each. The difference simply a matter of saying we would like more money between 41p a share and 50p a share, as far as the from the financial sector. The time is incredibly country and the Government is concerned, is about £9 valuable. billion. There is a lot of value to be put back into RBS As I said, I was spending a day a week at least when before that repayment can be made without a loss of starting this charity. I was very lucky; my employer at money. I think the country might expect to make some the time said that this was important to do, not least sort of profit on the deal. There is a lot of value to be because it was something that was in the sector and put back in, and the focus on the Board is to try to would help from a broader marketing perspective for get that value put back into the Bank, swallowing the firm, but I think also because it was the right thing what has to be swallowed in order to get that done. to do, and it was that confluence of interest that made We cannot afford, perhaps, to share the high moral what we did successful. So no, I do not think it is stance of Archbishops if it would damage the simply a matter of saying, “Just give us more money,” institution and damage its prospects of restoring value. but it is also, “How else can you help?” Chris Blackhurst: I would say as well I think there is Q253 Chair: So your argument is that in a liberal an issue, if you are looking at bankers to give more, society, where we practise capitalism, which is the you have to look at the charities they are giving to. only system that provides for prosperity, etc, you have Too many give to their former schools, their former to take a laissez-faire attitude to the morality of people universities, and I think there is a wider argument that receiving large bonuses and what they do with their says, “Should those schools, should those universities, bonuses. In the end that is not the state’s business? have charitable status?” because there are lots of Sir Sandy Crombie: I would not use the expression charities that do not get money from bankers and the laissez-faire either. We are doing what we have to do bankers will never look at in a million years. It is to restore value to the institution. The individuals who too complicated to just say that we want their money earn money will have individual rights to do with that because I think it is a skewed sector. money what they will. I do not think it is down to the The other thing I would say, just in relation to the Bank to tell them how to run their lives, what moral bankers, is that I do wish we would stop singling out code to have, what duty they should feel to society to bankers. Wayne Rooney earns £200,000 a week, contribute personally their time or their money. We which is £10 million a year. Is the Archbishop of cannot involve ourselves in that any more than any Canterbury saying to Wayne Rooney or to other other employer could. However, that is not to say that footballers, “You earn too much; you ought to be the institution itself is in any way falling short of its giving more to charity”? Yet bankers appear to be responsibilities. It feels a sense of duty to the country, right at the sharp end, and I think it has to be much a sense of commitment given the funds that have been broader than that. made, but then the Bank actually underneath all of this, behind the scenes, has been a significant Q255 Charlie Elphicke: Is that then a central point contributor over the years. In my role as chair of the here? Everyone keeps going on about bankers, but is sustainability committee I have good sight of all the it first time to move on and, as Sir Sandy said, we various activities that the Bank indulges in and it is should be focusing on getting our money back rather trying very hard indeed to be a good citizen as a devaluing the business and devaluing the nation’s corporation, as well as to give its employees a shareholding in these nationalised banks? Is it also chance—themselves individually—to be good time to stop just going on about financial services? citizens. There are a lot of rich people in this country across the whole broad range of areas, and is it not time for Q254 Charlie Elphicke: Gentlemen, would I just be us to say it is not just about banks, but we should alone in thinking that most people in financial highlight and increase the awareness of matched services, and indeed most high achievers and wealthy giving schemes not just in banks but across other big people across the whole of the UK economy, work businesses and other large employers? Is it time that long hours. If that is the case, are they not just going we look across the whole landscape of wealth and to go home at the end of the night, bushed, sit down, encourage each and everyone who gets a good wage have a gin and tonic, relax in front of the TV? And to be giving more to charity? our best hope is not to ask them to volunteer, but to Chris Blackhurst: I would say there is a sharp give money because that is the greatest contribution distinction in the banks that were bailed out by the Public Administration Committee: Evidence Ev 39

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst taxpayer, of which Sir Sandy’s obviously is one. In money in there as well. So far, that fund, as I say, is that instance the Government has some control over over £5 million. That is entirely down to the fact it is that institution. There are an awful lot of banks— matched funding and that is a big society fund, and I Goldman Sachs, Morgan Stanley, JP Morgan, am beginning to see where it is coming from. Deutsche Bank, I could go on—who do not owe anything. The Government has very limited control Q257 Paul Flynn: But it’s chicken feed compared over them; they are multinational businesses. I think with the money that Government has at its disposal. we should stop singling out banks and individual We know people have a good feeling when they bankers, and I agree with you we should be looking contribute to the television charity giving, but again at the broader spectrum of wealthy people generally that turns out to be about £20 million, which is and encouraging them all to give more. nothing in terms of national charity spending or Government spending. I am not going to apologise, Q256 Paul Flynn: I heard the Christmas message of but I do not read the Evening Standard. the Archbishop of Canterbury. The Christmas message Chris Blackhurst: I would take exception to that. of David Cameron was, “Love thy neighbour and Paul Flynn: I have no idea what your scheme is, make sure his children have preferential internships.” Mr Blackhurst. Isn’t it always thus that you were suggesting, Chris, Chris Blackhurst: If you are a small charity, it is not the spirit level idea—that a happy society is one that chicken feed. If I am a charity in Brixton that is trying is as equal as one can make it, but while we can be to help school leavers find jobs, for me £5,000 is a successful in making the poor richer, what is huge amount of money. obviously impossible to do is making the rich poorer? If we are going to bring the two together, we must do Q258 Paul Flynn: But we are talking in terms of that, but it is very difficult to affect the rich because national spending, of Government spending. they have been very successful in making themselves Chris Blackhurst: Well, we have to start somewhere. rich anyway and if they keep on doing that they will Paul Flynn: That is billions. go on making themselves richer. Isn’t this whole preposterous big society gimmick Q259 Chair: We could point out that Government nothing but an attempt to window dress, to make debt dwarfs most other debts in society. Any other things look good; it is in the self-interest of comments from the panel on this question? politicians, just as much of the money that banks give Martin Brookes: I think just painting it as either state and the money that comes from big business is purely or private funding is not helpful. There is scope to out of self-interest in order to advance their own PR. increase charitable giving in this country markedly, If we are going to ensure society becomes more equal and there are certain bits of society that are natural and a happier society, as many of us would agree, places to focus some of that energy, such as the surely the only way to do that would be to do it from financial services sector. Things like the dispossessed the state and to say, “There are rules here. There are fund I think are very good for the idea of charity, the taxes here,” and not to try to nudge people to behave need for charity and the opportunity for individuals to in a way that is not sympathetic with human nature? give privately, whatever their political views. Those Human nature is to be greedy and selfish, unless the sorts of schemes are good and we should encourage purpose of the state is to overrule that not by nudging, them, but that is not saying that the state is bad; by introducing rules. private is good. I think that is a false dichotomy. Chair: I think we should allow the panel to respond. There is scope for there to be more money directed Chris Blackhurst: I just want to say one thing on that. towards some of our greatest needs because the state I personally was very sceptical about the big society, is unable, for whatever reason, to service all those although I could see where he was coming from. I can needs. People who would want to encourage see that. Wearing my Evening Standard hat— charitable giving, like the organisation I work for, are Paul Flynn: Oh dear. not doing that from some ideological position that Chris Blackhurst: Sorry. Wearing my Evening says we are anti-state. Several of my Board are long Standard— time Labour donors. They just think that there is scope Paul Flynn: Speak as a human being then, rather than for more private funding to come out of particularly an Evening Standard person. the wealthy in society and be well-directed and Chris Blackhurst: Well, let’s speak as a human; a targeted. It seems to me that is it; it is not about saying human being that works at the Evening Standard. that private is better than state. Paul Flynn: Well, we all have problems in life. Chris Blackhurst: We started a dispossessed fund to Q260 Paul Flynn: But how are we going to change help smaller charity projects in London. I think I can the nature of giving in this country? We do not have say on behalf of the paper we were absolutely amazed the tradition that they have in the United States; how by the response. So far we have raised over do we get ourselves in that position, where it is taken £5 million, but part of the reason that that has been as a given that people are philanthropic? One could successful—and somebody mentioned it earlier—was also say they have appalling public services in the this phrase “matched funding”. For every pound you United States so they have to give. What do we do? give, the Government also gives a pound. That really Deteriorate the public services? appeals to wealthy people because suddenly they see Chair: Briefly. that they are not just giving it on their own and it is Martin Brookes: No, I do not think we do deteriorate not going into a bottomless pit; there is taxpayers’ the public services at all. There are various things that Ev 40 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst you can do with a tax system; there are various things Q265 Chair: So we do not need the Government to you need to do in terms of making giving more public, do anything? What recommendations should we be more prominent, so people do it very visibly and putting on the report? openly. As I mentioned at the beginning before you Sir Sandy Crombie: I think we had this played out a joined us, there is clear evidence that this is a bit earlier on—the difference between that which is powerful way of incentivising. We need some sort of vital and that which is good to have. I often use a UK version of the Giving Pledge that Warren Buffett parallel, which is the human body. If you immediately and Bill Gates launched. enter a very cold environment your body will distinguish between a vital organ and that which is just nice to have. The blood flow to you fingers and Q261 Paul Flynn: Can we make them all Knights of toes will be cut off to preserve the heart and lungs and the Garter and things like that? We use the honours brain. So physically, our systems work to distinguish system in that way now. Is that a legitimate thing to readily between the vital and the good to have. I do use? not think there is any dispute among the people at this Martin Brookes: If that is what is needed to table that the Government will provide the vital. At encourage much more giving, then I do not think that the other extreme it is probably easy to distinguish is necessarily— certain things that are just good to have, and in the middle you can have a boundary discussion about Q262 Chair: Why in particular do you think matched whether something is or is not either side of the vital giving has such a low take up amongst national boundary. institutions, or indeed amongst business generally? What we are talking about here though is voluntary Martin Brookes: I think it is partly because giving. The state takes its taxes; it is not always a employees do not know about it. I do not know about voluntary activity, although some may view it that the matched giving at RBS. way, and we will use those taxes to provide that which Chair: Is it the responsibility of employers to create is vital. But we are talking more at the other end of a culture in their companies so that people participate the spectrum, where things are good to have, where in it? we have a stronger society if services are provided. I tend to the view that rather than focus on narrow Martin Brookes: Yes, take Goldman- groups, we have to have everyone believe that it is Sir Sandy Crombie: It is a professional matter. their responsibility to contribute what you can: if you Chair: Sir Sandy? are at the receiving end, not to ask for too much; if Sir Sandy Crombie: Certainly the two employers of you are at the giving end to give as much as you can, which I have experience have both had matched and for that giving to be not just money but in kind. giving schemes, but there is a realisation and belief Again, my experience through life has been that inside those organisations that we get better, more people engage in an entirely different way if they give complete people if they participate in society, if they some of their time to a cause, work with the people engage with what is going on outside the office. It is who are trying to help others and see those who will a way of demonstrating to them that we believe it is benefit from their efforts, and they will feel very important as a company that we give them time off to differently than just writing a cheque. So I think we volunteer, and if the organisations in which they are should. involved need money and they raise some for it, then we will match it. Q266 Nick de Bois: Sir Sandy, on that point, how much time and flexibility do RBS, the philanthropic Q263 Chair: So why is the take up of matched nature of which you clearly feel strongly about, allow giving amongst financial institutions so poor at the their employees right across the group, from the moment? branches system through to the bond dealer, to support Sir Sandy Crombie: It may be that some organisations voluntary effort? are not as enlightened and do not share the view that Sir Sandy Crombie: The statistic I have is that 40,000 they will be better organisations if their people are RBS people gave some office time last year to more complete people and have engaged with society. volunteering. That is 40,000 out of 145,000, so it is a decent proportion. The total number of hours contributed were 170,000 hours, so it works out about Q264 Chair: And how do we change that? four and a quarter hours per human being. As I saw Sir Sandy Crombie: There are organisations like those statistics, I thought, “The numbers are big; that Business in the Community that work with is impressive,” but on the other hand I am sure they organisations. I spent a year as ambassador for the could bigger. Prince of Wales in Scotland, effectively working with other businesses in Scotland to spread the message to Q267 Nick de Bois: Do you know what the rules are? them of the benefits of taking a more holistic view of Do they have rules on that? their role in society. I think we just have to keep up Sir Sandy Crombie: As I understand it, I know one those inputs to create enlightenment in the leadership division will give up to three days a year. In my old of these businesses. That would in turn change the employer, Standard Life, we were willing to let people nature of the businesses’ engagement with the have up to half a day a week or a few hours a week communities in which they live and work and the or, if people wanted to, we would work with them to people of those organisations. give them secondments of up to three or six months. Public Administration Committee: Evidence Ev 41

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Nick de Bois: And that was Standard Life. that we are investing in businesses where we can get Sir Sandy Crombie: That was Standard Life. the greatest return, then involving those who participate in our charity with that grant-making Q268 Nick de Bois: And that sounds very generous, process. We are a grant making charity; we do not but RBS? undertake the work ourselves, so we make grants to Sir Sandy Crombie: I do not know that RBS is any different charities within Barnardo’s and the NSPCC. different. I do not know the details of every local So, for example, grants are going to Barnardo’s young arrangement, but I do not know of any significant women’s project in Islington that works with sexually limits within the group to people volunteering a exploited, predominantly, girls. This year I have found sensible amount of time from the working week to out that, so far this year, with a fairly small donation involve themselves with charitable organisations. we have helped 79 children in Islington, one girl under the age of 11 who was being sexually exploited. Q269 Chair: Would that be a plus point on So having people who are involved with our charity somebody’s employment record? actually come and visit and see the work that we are Sir Sandy Crombie: My experience over many years doing is so hugely important to getting them in the is that people become more complete members of mindset that there is something both outside society. They are less focused, in the narrowest sense, themselves and there is a real difference we can make. on their day-to-day job and much more focused, in a I am hugely encouraged by the amount of support I broad way, on being more complete people, who can continue to get and the growing support from, contribute a lot more and make more balanced certainly, the hedge fund industry. decisions because they are involved, in a wider sense, in every aspect of life. Q273 Charlie Elphicke: We should not forget also about smaller charities, like Eaves for Women and the Q270 Charlie Elphicke: I just wanted to follow up Poppy Project, who do such brilliant work at the on Mr Flynn’s evangelisation of Marx’s theorem. Do grassroots level. How can the work of Hedge Funds you find that the hypocrisy of politicians is something Care UK be replicated across other business sectors? that harms giving? In particular, when they go on How could we do more of this excellent work? about how shocking internships are when most of Robert Mirsky: I have to say, although it was difficult them are in fact machine politicians who had at first to find like-minded people, again it was a internships using their contacts, and then rose to confluence of both self-interest, which I do not have become top of the Shadow Cabinet table. Also, when a real problem with, and that the industry as a whole they go around, bankrupt the economy then look wants to show we are giving back to the community. around for someone to blame; it happens to be If that deflects certain criticism for large bonuses, as bankers. Does that approach harm giving when you long as the money is going to a good cause and we then want to get money out of bankers to do good are using that money effectively and efficiently, I do things in society? not particularly care why they do it. I would like to Chris Blackhurst: I would say it confuses, yes. In the just get those charities that are working at the end, I do not think it stops somebody writing a cheque grassroots level that money. So, I think if you can find or deciding they are going to spend half a day a week ways in which other sectors, not just financial helping a charity. However, I think it muddies the services, can find interest both in doing good for waters. On the one hand you have the Archbishop society and also improving their own plight within a with a very clear statement, as you said earlier; then particular sector, I think that is a hugely helpful way you have this murkiness, and nobody is really sure if to begin to grow charities. something is good or if something is bad. I do think it muddies the waters, but I would not put it any more Q274 Charlie Elphicke: The other issue is in terms strongly than that. of raising money, and perhaps Martin Brookes will be able to come in here as well as an expert. You have Q271 Charlie Elphicke: Mr Mirsky, just turning to Hedge Funds Care UK that I think has raised about your own work, Hedge Funds Care UK, presumably £1 million since 2006. Meanwhile, the NSPCC or the money you raise is then targeted at actually Children in Need can raise many millions in one tackling the evil of child abuse at the grassroots level? night. How does one balance that off? Also is a USP Robert Mirsky: Grants only. the fact that you spend money at the grassroots while the NSPCC spends, I think, over £20 million on Q272 Charlie Elphicke: Therefore, do you find that advertising and campaigning rather than dealing with encourages more donation because the money is child abuse? actually used properly? Robert Mirsky: I think there are different ways to Robert Mirsky: I do again. The way we distribute our raise money and, again for us as a grant-making funds is through the assistance of consultants that we charity, the efficiency of those to whom we make have worked with. We have actually worked with grants is important, which is why we do give to New Philanthropy Capital in the past as well, but our specialist programmes. Although we have in the past current consultant is Dr Eileen Munro, who has been given to the NSPCC, it was only for their ChildLine— working with this Government looking at child abuse their online services—because we thought that was a in the UK. What we find most effective is having that particularly underfunded area that was working very kind of real expert advice both on the charity side as well. And so, I do think it is important to identify well as then using our own skill set again to ensure those charities where you can do things efficiently. Ev 42 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

That ultimately has to be what you as a donor are society, and those who earn the most in our society, doing. are so isolated from the rest of society. Martin Brookes: I think that the hedge fund industry Q275 Chair: Before coming to Mr Hopkins, the is very striking in that there is a list of fairly illustrious hedge fund industry has a huge number of individuals individuals within it—some of them you mentioned, who give very large charitable sums across the piece: like Mike Hintze, Arpad Busson, Paul Marshall, Ian people like Arpad Busson, Michael Hintze and there Wace—who have made a lot of money and are very are many others. Is this a rather unsung benefit of active in giving away not just their money but also having a hedge fund industry in London? Isn’t your their time and their effort. I do think they deserve effort just a small part of a huge amount of charitable more credit than they sometimes get. giving that goes on that does not show up in the public I think sometimes the investment banks are very consciousness at all? striking in not being so active as the individual hedge Robert Mirsky: It is and we probably do not speak funds are. I think that is partly the nature of big about it as much as we should as an industry. Even my institutions like investment banks rather than small, charity gets significant anonymous donations because more tightly controlled institutions like hedge funds. people want to support the work that we are doing. So I think there are lots of individuals who are very The industry as a whole has people across the piece. active. I am not sure that the financial services Chris Hohn and the Children’s Investment Fund, for industry collectively is really active. You could trot example, makes huge donations. off a list of very wealthy donors. The fact remains that the richest 10% of this country give 1.1% of their Q276 Chair: This is what I find frustrating. The City expenditure and the poorest 10% give 3.6%. Whatever of London is a huge tax generator for the UK. It is a list of individuals, and I could talk about Jim O’Neill huge generator of economic growth and prosperity for at Goldman Sachs, who gives a lot a money and is the UK. It makes London one of the great cities of the very active as a donor, Goldman Sachs as an world and makes Britain one of the great countries of institution is not. The richest 10% give just over 1% the world. Yet, it is all at risk because of the of their income and it is nearly 4% for the poorest reputational problems the City now has amongst the 10%. That is a very striking statistic that collectively public and amongst a lot of political leaders. as a society we should be awkward about, ashamed of Paul Flynn: Also responsible for the crisis. and want to do something about. Robert Mirsky: But not the hedge fund industry. Paul Flynn: Hedge funds are part of the gambling Q279 Chair: Should society be ashamed of it or industry. should the individuals concerned be ashamed of it? Chair: If the Chairman may finish his question, I Martin Brookes: I think both. would be grateful. Paul Flynn: It is not a question. It is a statement and Q280 Kelvin Hopkins: If I could just pursue that, a very biased one, if I may say so. your report draws attention to these statistics that we have just mentioned, but it also draws attention to Q277 Chair: Why has the City not got its act some of the reasons given, one of which is the rich together to demonstrate what it does from a charitable cannot afford it. I find that less than persuasive and it point of view and, indeed, to co-ordinate its charitable does, I am afraid, remind me of the famous film, “Wall giving far more capably in order to win over hearts Street”, when Michael Douglas said, “Greed is Good.” and minds for the benefit of the British economy? It was meant to be a morality play—a parable. He Chris Blackhurst: I would agree with that, and I think turned out to be a folk hero for the City. Appealing to one of the weaknesses of the City is that it has failed people’s better nature just does not work in the end. to co-ordinate and present a united picture and tell If they are rich, if they are self-centred and selfish, society what good it does. Banks themselves have they are not going to do this. The only way to deal failed to do that and that is a mystery to me. I have with that is to have stronger progressive taxation to said before that if Goldman Sachs paid for Great make sure that people less well off have their fair do. Ormond Street for a year, it would be “the Bank that Martin Brookes: Can I break that down? In terms of pays for Great Ormond Street”. It would not be “the the first part, us writing a report that rich people say Bank that paid big bonuses”, and that is how it would they cannot give because they do not feel rich enough be treated in the press. They do not see it that way is not a validation of that statement. It is merely though. It is a point of weakness in the City; I do not reporting what they say. I think it is a rather understand it. depressing statement, as is the statement that, “I cannot give because I cannot connect to a cause,” and Q278 Chair: But doesn’t this speak of so many when we have written those sorts of statements up I individuals who have become so insulated from the hope we have been fairly measured in how we are rest of society by their ambition and, in the end, the dealing with them. We are just stating what people say wealth itself. They become part of the sort of rather than endorsing it. international, global wealthy community. Though I So I do think it is very frustrating to meet someone emphasise, in my experience, most wealthy people I who is palpably and objectively rich, who has no meet give an enormous amount to charity, somehow sense of where they are on the income distribution they have not connected politically with the rest of and does not want to give because they do not feel society. That in itself is a very bad advertisement for rich enough. I think that is really quite depressing. such wide disparities of inequality if the wealthiest in That is really because they are, as the Chair said, Public Administration Committee: Evidence Ev 43

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst disconnected from society somehow. I think we that are privately funded that save the state money, should try to work out how we can connect them to and you could argue that they should be publicly society. That is why I think there is a collective funded because the state should be investing to save. responsibility. It is not just down to the individuals; it So that is the first one. is down to us as well. The second point is I do not think that the children I have a private view on appropriate taxation and what who are helped through Hedge Funds Care and the we should do about wealth, but I do not think my projects that Barnardo’s run around the country, institution and the sector as a whole does, to go back working with women and children who are sexually to my earlier point. exploited, give a damn where the money comes from. I just think they realise that they need help. We as a Q281 Kelvin Hopkins: We talked earlier about areas society should recognise that there needs to be more that are appropriate for charity. I think money for funding of those things, not less funding of those Scouts and Guides and small organisations that are things. If we can get private donors to do that, to inappropriate in the public sector—fine. adequately plug some of that gap and provide some Chair: Hospices? of those services, I am willing to do that. I want to do Kelvin Hopkins: Hospices do derive a high that and I do not think that is an ideological point; it proportion of their income from the public sector. is an entirely pragmatic point. If you ask any of those Martin Brookes: No they do not. Children’s hospices beneficiaries what is the nature of the cheque that is get less than 10% of their funding from the state. Is being written to provide the service, I do not think that right or wrong? they really care.

Q282 Kelvin Hopkins: Hospices have grown up and Q283 Kelvin Hopkins: This philosophical debate I support our local hospice very strongly and could go on, but the simple point is that the richest sometimes financially a bit as well. That is one of third of the population give less as a proportion of those at the interface. Some might argue that a hospice their income than the poorest third. is one of those organisations that should actually be Martin Brookes: Yes. part of the National Health Service, but they have Kelvin Hopkins: And it demonstrates to me that the grown up as an addition to the Health Service and rich do not actually care and will not donate to what they are partly public funded, and I think rightly so. are often vital services. Chair: What’s the question you are asking? Martin Brookes: I think it shows to me it is a problem Kelvin Hopkins: The concern I have: you say you we have to try to fix. want to bring people into society. There is another factor. It is not just about giving and choosing where Q284 Chair: But it comes down to this peer group you give and targeting certain areas where you give, pressure. Despite the tremendous examples of many but actually recipients too. When I was young, the individuals in the City and amongst wealthy people— idea of charity was frowned upon. We wanted services let’s not just brand the City; I am glad the point was provided to us to be a social right. Where it is a vital made about footballers—there does not seem to be public service—and increasingly charity is creeping that culture that if you have been fortunate enough to into the public services—it is in a sense that we give become very wealthy, then you should participate in according to our ability through the tax system but we the charitable sector with your time and your money. take according to our needs through the public How do we change that culture? Should we encourage services. more people to boast about what they give to charity? Chair: But do you have a question, Mr Hopkins? It is a very un-British thing to do; the Americans do Kelvin Hopkins: I am trying to press you on this case that a lot, but the British do not do it. What is the of where charity is appropriate. If you want to really answer to this question? We are all rather shy about make sure that people donate generously, can you ever what we should do. Sorry, I will start with Sir Sandy. do it through persuading them to be nice and to do it Sir Sandy Crombie: I think we are probably all shy with charity? from suggesting we know the answer to everything. Martin Brookes: Can I answer that while making two Chair: But haven’t employers a role? observations? I think there are all sorts of anomalies Sir Sandy Crombie: Let’s try and categorise people. about where public funding begins and private There are those who are giving; there are those who funding ends and so on. In the US breast cancer are giving when prompted; and there are those who funding is funded mainly by the state; in the UK it is are not giving at all. If we look at those who are funded mainly by private donations. I do not know already giving, we could look at why they are giving which one is right in terms of how you should design or what they are giving to and perhaps understand it a society; I think there are endless anomalies around a bit better because we want more of that to happen. that. The fact that children’s hospices get less of their I have a particular example recently where one person, funding from the state than do adult hospices I think when prompted on three separate occasions, has given is very striking. It is a consequence, really, of the quite readily to good causes. He happens to be ability of the children’s hospices to raise money from reasonably well off. So I think that there is a lot of the community. I do not think it is necessarily a capacity to give that is just needing to be prompted, sensible ordering of things in terms of where the state and we have to look at what those prompts are, begins and ends. That is the first thing; it is to say that because if we can prompt better, whether it is the I think it is very difficult to draw firm boundaries here. charities themselves or it is something more generally There are all sorts of anomalies. I know lots of things that is happening, then more will be given. It is not Ev 44 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst that there is a reluctance; it is just that it is not front hedge fund industry. Last year I think they raised £15 of mind and people are just not thinking about it. million at one event. Chair: I should declare an interest; I attended that Q285 Chair: But is it about employers publicly event and the former Prime Minister, Mr Blair, spoke supporting and publicising those individuals who give at that event. more in order to create that corporate culture? In Goldman Sachs, for example, it is a good thing to give Q291 Paul Flynn: I regard a hedge fund as part of lots of money to charity and that becomes part of the the gambling industry rather than part of commerce. corporate culture of Goldman Sachs, which it does not It does not produce anything; it does not add to human seem to be at the moment. Although, I hasten to add happiness in any way. It enriches the people involved the one person I know who has become very rich at in it, as gambling does. Goldman Sachs has given a great deal of money to Chair: By all means answer the question, Mr Mirsky, charity. but isn’t this part of the background noise that we Sir Sandy Crombie: We should distinguish though have to overcome in order to encourage more between the corporation and the individuals. philanthropic giving? Ultimately, the wealthy individuals are not necessarily going to be prompted by corporations. I think we Paul Flynn: The Chairman’s making a statement that should separate the two things in our minds. The these presumably hedge fund people need to be lined companies do not rule the people. They can give up for beatification because they are such wonderful prompts; they can give— people giving huge amounts of money, but can we Chair: But it’s about the culture, isn’t it? get some idea of putting it into scale by saying what Sir Sandy Crombie:—licence to do things. There can percentage of their turnover or profits are given to be a culture inside a business, but all businesses will charity? have people who do not necessarily absorb the culture, Robert Mirsky: The fourth largest charity in this and I do not think it is the answer to everything. I country is fully supported by an individual at a hedge have already said I think companies can do more, but fund. The fourth largest charity—it is larger than the I thought the debating point here was how we Wellcome Trust now—is supported by the chair of a prompt individuals. hedge fund. I cannot tell you how much money from the hedge fund industry goes in. Q286 Chair: Do you think politicians asking, “Well, what is his agenda then?” acts as a deterrent to public Q292 Paul Flynn: So there is no way of knowing giving? Mr Mirsky? whether it is the widow’s mite or whether it is an Robert Mirsky: Yes, I certainly think asking the attempt to get to heaven through the eye of a needle, question, “Well, why did you do that? Where is the or what are they? self-interest there?” is an unhelpful thing to do. Robert Mirsky: He gave nearly £500 million two years ago to this charity. He gave £350 million the Q287 Chair: But it is always going to happen, isn’t year before. I do not know what the number was for it? last year. Robert Mirsky: It will, but it does not happen the Chair: When Labour Chancellors borrow as much as same way in the US that it does here, so I wonder they do, that seems like a widow’s mite obviously. whether it will always be this way or will people accept the fact that this giving is happening and it is Q293 Paul Flynn: Somebody mentioned Bill Gates benefiting good causes, and the more we attack the earlier on. Bill Gates has a real problem in that he less likely it is that there will be continued giving? cannot live long enough to spend all his money, and quite rightly he has spent it on unpopular causes, but Q288 Chair: So in fact the politics of envy is very causes that are right. Getting rid of polio and stuff; destructive of charitable giving? that is fine. Robert Mirsky: Yes. Sir Sandy Crombie: Yes. Robert Mirsky: The fight against AIDS? Paul Flynn: When we go along to other charities, and Q289 Paul Flynn: Could you tell us then, Mr I think Mr Crombie mentioned that he worked for the Mirsky, what percentage of the turnover of the hedge Prince’s Trust, I have certainly noticed, in my fund business is devoted to charitable giving in your experience, in trying to work with charities as we all organisation? do as MPs, that if there is a Prince’s Trust event, the Chair: It would be more realistic to ask about profits, number of people who turn up will be about four times wouldn’t it, rather than turnover? the number who turn out to an event that does not Paul Flynn: Profits—even better. Profits and have royalty on it. They have some vague ideas that turnover—what percentage ends up in the hedge the MBEs will be handed out when they leave the fund charity? room with a Knight. There are all kinds of ulterior Robert Mirsky: Sorry, that is not a question I can motives, and is it a question of royalty supporting answer. charities or royalty trying to be shorn up by charities by appearing to be philanthropic and so on. Q290 Paul Flynn: What sum of money is involved? Chair: Different societies reward different people in Robert Mirsky: Let’s take an example of the ARK different ways. charity, which is one of the bigger charities in the Paul Flynn: Indeed. Public Administration Committee: Evidence Ev 45

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Chair: Stalin used to make people a hero of the Soviet that is where there is lots of data shared; where you Union. Was that necessarily a good motivation? I have an infrastructure that can be used. think this is a rather destructive line to your question. Chair: And you create a culture. Paul Flynn: Better than going to a Gulag I would Martin Brookes: To create a culture and I think have thought. There were two ways of doing. You Goldman Sachs should publicise those employees that have derailed my train of thought, Chairman, and not use their very generous matched giving programme of for the first time. I think the point we are making: in $20,000 dollars a year and hit the ceiling of that. I the standard book for MPs, who are the only group of think they should champion those; they should people who are as despised as bankers are now—we celebrate those; they should try and encourage others are similar social lepers in society—the advice given, to do that. which is absolutely sound advice in a splendid standard work for advising new MPs how to behave, Q295 Chair: Do you think the Government writing is that all charitable donations are to be strictly a thank you letter or establishing a national day to anonymous for all kinds of practical reasons and other celebrate donors are initiatives that would help? reasons as well. What we seem to be suggesting here Martin Brookes: I think there could be better is that we have to give people an ulterior motive for targeted initiatives. giving to charity by advertising their generosity. Is Chair: They could be better targeted? Mr Mirsky? that the way forward? Robert Mirsky: No, I would agree with that. I am not Robert Mirsky: If that generates more funding for sure that would help too much. charities, if we can take more young girls of the streets Chair: Payroll giving—Mr de Bois. who are being sexually exploited, I do not really care where the money comes from. Q296 Nick de Bois: Sticking to the same theme of Chair: Is it necessarily a bad thing to celebrate good employers, payroll giving theoretically should be one behaviour and positive social behaviour? Is that a of the easiest ways of giving money. Once it is done bad thing? the chances are it will not be adjusted until someone leaves their job. I would just like to kill off, if I may, the talk of rich and less well-off donors. Let’s talk Q294 Kelvin Hopkins: Can I just make a general about the middle-income earners, for whom I would point? We are arguing constantly from particular cases have thought payroll donations would be quite to the general. There are individual donors who are attractive. I do not quite understand this, and I would wonderful people—Bill Gates, George Soros and one like your opinion. Perhaps I could start with Mr or two others—and lots of others doing nothing, but Blackhurst, because I think you have expressed quite there are also good causes that are being helped. I a strong view on this. Why do you think it has not should say that sexual exploitation of children should taken off as a successful way of encouraging people be a matter for the police, for social services and for to donate? the health service as well, rather than a charity. If Chris Blackhurst: Because the bosses themselves are somebody is being sexually exploited I want the not giving the lead. police and the social services to be involved as well, Chair: That is the point. and they are publicly funded public services. This Chris Blackhurst: And I would say that if you worked constant emphasis on individuals doing good things for any organisation and you know that your boss or donating lots of money actually does not answer gives 5%, then you are more likely to follow suit than the general case about the wealthy people who give if they do not. I think that is the major problem. All nothing or do not care. FTSE 100 and all FTSE 250 company executives Chair: Was that a question? ought to give 5% of their earnings to charity and then Kelvin Hopkins: It was a question. I want to make we would see what would happen. the point about arguing from the particular to the general. It does not work. Q297 Chair: Does the rest of the panel agree with Chair: Does anybody wish to comment that proposition—that it is about those in leadership Martin Brookes: You are right and we have in the last positions giving the lead? decade in this country hyped up giving by rich people Chris Blackhurst: It has to come from the top. and taken individual instances of it, and made general Martin Brookes: Yes, but then with mechanisms to points about it. The hard data on how much people help people give. give prove that that generalisation is invalid. Chair: Sir Sandy, you were looking pensive? However, the response to that can be either we Sir Sandy Crombie: Around 10%1 of RBS staff harangue rich people, including those who do give contribute through the payroll. large amounts of money and say, “What are their motives?” or we try to understand why those rich Q298 Nick de Bois: 10% of your staff. That is quite people who do not give choose not to give, and see if high, would you say, compared with other companies? we can encourage them to give more. Or we can Sir Sandy Crombie: My response to that would be address it through the tax system as well. That is 90% do not. another perfectly legitimate response. What I think we need in this country is ways of Q299 Nick de Bois: No, I am saying compared with understanding better why people choose not to give other companies presently. I agree with you it is low, and ways of encouraging them to do so. The 1 Note from witness: Correction—staff payroll giving in the workplace is key here. That is where people are paid; UK is 14% not 10%. Ev 46 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst but I am not sure if there is an average. I thought administration to do. Is that a problem or are the we were talking about 1% of all donations are given charities a problem? through payroll. Martin Brookes: I honestly do not know the answer Sir Sandy Crombie: I think that is right, yes. to that. I do not have a good sense of it. I do not think Martin Brookes: Of those firms that have payroll it is the charities, but I do not have any real sense of giving, about 6% of employees use it. understanding. I totally take the point about regular gifts through payroll, whether they be small or large Q300 Nick de Bois: Okay, so that is slightly higher. but regular, and I think it is really important. I do That is my point; I do take your point though. Sorry, think one of the great puzzles is why payroll giving carry on. has not taken off, and I simply do not have an answer Sir Sandy Crombie: Can I make my point now? to it. It really is something that needs to be cracked. Nick de Bois: About the leadership. Chair: Mr Blackhurst, do you have a view on this? Sir Sandy Crombie: It started with a statistic. So we Chris Blackhurst: My view would be that charities have a piece of data. It could have been more? Yes, are not doing enough and that too much emphasis is absolutely. Is it right though for the chief executive to put on people writing large cheques. Certainly, from say, “Right, okay, I am giving through my payroll; my own perspective, as somebody who receives therefore, so should you”? And I do not like that type mailshots galore, I am sure like everybody else in this of leadership. “If you do not do this, then I will think room, at home, I cannot think of one that has talked less of you,” I do not think that that is the way to to me about payroll giving. It has talked to me about make a difference. I think that we should be looking writing a cheque or setting up a direct debit, which much more at the generality of the good that can be are quite complicated things. The beauty of payroll is done. that it is taken at source, it is automatic and it is quick. There has been a great deal of emphasis on individual I agree; I do not think charities do enough. giving, a lot of talk of the wealthy and whether they Chair: Moving on to corporate social responsibility, are or are not doing enough. Behind some of that we Mr Elphicke. are in a sense talking about large single contributions and we are seeking to get more of them, but what I Q303 Charlie Elphicke: Yes, on this Sir Sandy, would have expected charities to want more of is Royal Bank of Scotland actually does quite a lot of regular giving, because if you are out there and trying corporate social responsibility work. They have spent to provide a service, then you need the certainty that several hundred million pounds on financial education the funding will be there to allow you to invest in in classes, yet as far as I can tell you have not spoken having the skills, resources and the facilities necessary about that at all as part of RBS’s work involved in to provide that service on an ongoing basis. That is giving. Do you think you are hiding your light a bit where regular giving, to me, has a lot more under a bushel as a bank? significance than individual one-off lump sums. Sir Sandy Crombie: It may be a good old Scottish trait to be generous but not necessarily to make a lot Q301 Nick de Bois: Can I bring it back to the point? of fuss about it. That is not the way that society works Do you, in any of the organisations you work with, up there. I do think the Bank has done some extremely actively make your employees aware of the good work over the years. Something like 350,000 opportunity to donate or do you think—and I do not children last year had a class to increase their financial think this is unreasonable—charities should do more awareness. A lot of young adults these days will have to make people aware of what they can do? benefited as a consequence of this training, and the Sir Sandy Crombie: In the case of RBS there is a idea extends way beyond just schools now. So I think scheme that is actively used. Although perhaps the more I understand about what this particular comment has been made that 10% is not maybe as organisation does, the more impressed I am at the high a proportion as it could be, annual reminders are range of activities and the sincerity with which these issued to the staff that this facility is available to them things are done. and the benefits are laid in front of them. So there is Again, a way to categorise what this organisation does a prompt on a regular basis to think about doing it this quite broadly is to say there is a whole range of way. That does not mean, of course, that the staff individual activities supported by the organisation, won’t contribute in other ways: either their time or whether it is giving in kind or money and, on top of their money. So we cannot presume that just 10% of that, I think one way to think of it is that what RBS people are contributing. It is just that 10% have agreed has done is take its normal day-to-day activities and to contribute this way. extend those down outside the day-to-day influence and interests of the group. So it is clearly of interest Q302 Nick de Bois: No, and I am not trying to make to the group that the populace has better financial this an attack on RBS. It is almost that you are being education and RBS has involved itself. It is clearly a little bit defensive there. I am trying to get to an of interest that people are well-advised and RBS has understanding of why this does not seem to have taken involved itself in the advice-giving activities for that off. So let’s look at the role of the charities. Can I ask part of society that needs it. It is clearly important that you, Mr Brookes, do you think the charities are enterprises get going and RBS has involved itself in pushing enough that this is an easy way to donate or stimulating and facilitating the creation of young are employers resisting? Let’s face it: half our enterprises. businesses are SMEs. I imagine their payroll would It does not make a lot of fuss about it, but I think you be delighted at the thought of having more are right that there has been a lot of good work. Public Administration Committee: Evidence Ev 47

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Whether it would be an exemplar and should make Q307 Charlie Elphicke: Here is a real irony, because more of it to encourage others is an interesting take the case of RBS, and you would not know this debating point, but it is not part of the nature of the from listening to Sir Sandy, but they do have a CSR place to make a big fuss about it for brand reasons. officer; they do put it in their annual report; they do spend, I think, something like £350 million a year, Q304 Charlie Elphicke: But equally, at a time when from recollection—this is serious money and actually your Bank is under siege from many of the public, as serious work. Is it that companies are paying lip well as from Mr Flynn, and there is great concern service, or are they quietly doing it and should be across the whole area, is it actually about time the shouting from rooftops, “Look, we are doing all this Bank said, “Look, these are things we do; we are not sort of stuff”? all bad guys.” Also, what about Chris Blackhurst’s Chris Blackhurst: Probably in that case, but I do not suggestion? Why don’t you guys fund Great Ormond think so. It might be because RBS are Scottish, I don’t Street Hospital for a year? Why don’t you do know; they are deeply quiet. I still come back to this. something really radical like that to send home the RBS might be exceptional, but certainly in the City message that, “Actually, we are not bad guys; we have organisations I have come across it tends to be paid changed and we care”? lip service to and that is a great pity. Sir Sandy Crombie: There will come a time when Sir Sandy Crombie: The Financial Reporting Council people are willing to listen rather than merely berate has a say in what companies put out in their regular those who are termed bankers. I think it is often reports to shareholders, and there is a great emphasis forgotten that RBS has 145,000 of them and not just on reporting that which is strategically important. a few hundred. The organisation has a responsibility Within the RBS annual reporting accounts, you will to all of its people to involve itself in society in a find the section on corporate sustainability, but that manner that is in line with where people live and which is strategically important to a bank does not work. To focus on one organisation in one conurbation necessarily cover every aspect of the good that the that might benefit a very limited population is not necessarily consistent with the values and ideals of the people of the organisation do. whole organisation, which would want to support the communities where we live and work. Q308 Chair: Is that something that should change? Sir Sandy Crombie: No. Again, we are talking here Q305 Charlie Elphicke: Mr Blackhurst, you say the in a way about shareholder information, and the Bank Prime Minister needs to consider how CSR can be does report its activities with the defence sector, made to matter more and you suggest it could be done energy companies, those who extract oil in perhaps through a financial incentive. First, do you think that environmentally unfriendly ways and so on. That type RBS and Lloyds HBOS are hiding their light under a of thing is covered as strategically important. We put bushel and ought to do a bit more? Also, how would out a separate corporate sustainability report that goes you see making CSR matter working in practice? a little bit further. Chris Blackhurst: I think they probably are hiding their light under a bushel. I did not know they did all Q309 Chair: It is astonishing that there are people that. I think CSR for too long has just been paid lip who believe that the corporate social responsibility of service to by companies. Let’s be honest, nobody got our major high street banks is not strategically to be Chief Executive of any private organisation by important to those businesses. I find that astonishing. the amount of CSR work they did. You get to the top Sir Sandy Crombie: It is reported, but the weight of because you are good at making money in businesses; reporting, given that banks have such an impact on you do not do it because your CSR side is society in other ways, not just the ways that we are particularly strong. talking about— Saying that, we come back to something I said earlier that there ought to be a dedicated CSR director; it ought to be a section of the annual report; every Q310 Chair: But the whole of the City is floundering company should be required to declare what it does on this great bonus problem—this public relations in the CSR field. That way you start to have disaster—of paying bonuses out of banks that some individuals in the organisation taking responsibility would describe as bust. I would have thought trying to for it—people who might themselves be high fliers. redress the balance on that is strategically important. Too often it is parked at the side; it is maybe Sir Sandy Crombie: Reputation is strategically somebody who has seen better days in the important, but again I come back to that there will organisation, who might not be heading for the top, come a time when people are prepared to listen and who tends to look after the CSR. That should not be interpret fairly. At the moment, there may be perhaps the way it is portrayed. more of a perception that what the banks talk about in this regard will be viewed somewhat cynically. So I Q306 Chair: It should be part of the mainstream of think we have to try and get over the point at the the business. appropriate time that there is a lot going on, but no Chris Blackhurst: It should be part of the mainstream more than you would expect in an organisation of the of the business, it should be part of the reporting size of RBS. I think the issue is whether we can get requirements and it should be something that the other institutions to do this much rather than put too companies take very seriously indeed. much emphasis on what this particular one does. Ev 48 Public Administration Committee: Evidence

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Q311 Charlie Elphicke: Finally, how can large come. So I think there is an element of vagueness organisations build relationships with smaller where that vagueness can be removed with negotiation grassroots charities? and discussion. At the moment I do not think we need Martin Brookes: I think big organisations often will to get too hung up on that. employ someone who deals with their charitable services side. All the major banks, for example, do Q313 Nick de Bois: I will try not to get hung up on that already. They can deal with the relationships with it, but I will try and pursue it if I can. From what you small organisations. Lots of big organisations do have said there, if it is dependent on a business plan already work very successfully with small charities. I from the Big Society Bank, which is fair enough, that do not think the fact that a charity is small necessarily suggests to me that you will be looking at it strictly means that an organisation cannot engage with it as a commercial opportunity as opposed to looking at effectively. It sometimes will mean that it is it in a more favourable light: as part commercial and underinvested in certain things and it does not have part motivated by putting something back in to the many resources, but I think it is very easy and quite community and into society. As we both know, if a straightforward to deal with charities of all shapes and business plan is a terrific business plan it might attract sizes. We do that regularly, and we see big, small and a slightly more attractive deal from a bank. If it is medium sized companies do it. I do not think that the something that you might be slightly concerned about, size of an organisation is an excuse not to do you could be whacking up the rates on it. Can you be something. Having an appointed person who is a little more precise? responsible for all charitable activities in the Sir Sandy Crombie: I cannot be. I am not involved in organisation is a start. the discussions, and the discussions are not Chair: I would like to deal lastly and briefly with happening yet. the Big Society Bank, but Mr Hopkins did you have Nick de Bois: Oh, right. a contribution? Sir Sandy Crombie: You have used the term “strictly” Kelvin Hopkins: I was going to talk about the Big in front of commercial. If we were being strictly Society Bank. commercial, I think terms would be sought that are Chair: Can we start with Mr de Bois first then? likely to be different from those that in reality will Kelvin Hopkins: Sure. emerge. The Big Society Bank, as I understand it, has a remit to be self-sustaining. It has to make a return Q312 Nick de Bois: Thank you, Chairman. Given on its money, and the Bank and its funders expect it that the social enterprise market is about £200 million to get an element of return, but I think there is plenty in this country at the moment, the idea of a Big of room for discussion, and no doubt there will be Society Bank that could be capitalised by, as reports when a plan is produced that is deemed credible, have it, up to £400 million I think is fantastic. I am a about what that return will be. little confused though. Sir Sandy, if you could just clarify for me, the amount of money that is being Q314 Nick de Bois: If it is anything less than, shall talked about being contributed from RBS, is it a grant we say, your prevailing business terms, what is the or is it a loan, or is it a favourable loan? What kind point of you getting involved? Why would you get of return are you expecting? It seems like these talks involved? Is there a little bit of, “Well, perhaps we have been going on for rather a while and I am trying should do this because we have been the biggest to establish what type of loan or grant it is. receiver of a donation in the last three years”? Sir Sandy Crombie: As I understand it, the Big Sir Sandy Crombie: It is part of a two-way agreement Society Bank will be financed from two different between the major banks and the Government to try directions. One is Government accounts, with some and settle things down. All the hurt and all the bad hurdles to be cleared, I think, before that money starts feeling that exists is perfectly understood, but we need to come across. The other source of funding will be to find a way, a mechanism or an agreement that says the major banks who contributed to the so-called that we want to be part of society and here is an offer. Merlin Agreement. It was part of that agreement that the Banks would seek a commercial return for their Q315 Nick de Bois: So looking at it from the other monies; it is effectively putting equity capital into a end of the telescope, you have been kind enough to fund, which will distribute the money on a wholesale indicate to us that you actually as a group support a basis into other funds and it will eventually end up in number of social enterprises on your own. So what do social enterprise businesses. you see the Big Society Bank providing that you are So the agreement is that it should be on commercial not doing already? terms, whatever that means. There is a vagueness Sir Sandy Crombie: My understanding again is that about the term, and no doubt that will come out in RBS involves itself in a very significant way in the discussion with the Big Society Bank itself. The Big social enterprise sector. My understanding, though, Society Bank itself has an obligation, having been without being precise about what commercial means, given an objective, to come up with a business plan is that the business that is done is done on commercial and a structure to realise that objective. The stage that terms. So there would have to be a belief that the we are at is waiting on the business plan and the social enterprise is a viable enterprise and, as well as structure. When the business plan is available there producing non-financial returns, will produce financial will clearly have to be discussions between those who returns that are adequate to service the debt. There is are giving substantial sums of money as to what already a commercial market there that exists, and would constitute a return and when that return would RBS has involved itself in a big way. I think what the Public Administration Committee: Evidence Ev 49

3 May 2011 Sir Sandy Crombie, Robert Mirsky, Martin Brookes and Chris Blackhurst

Big Society Bank is trying to do is provide ready seems to me a bit churlish given the vast sums of funding to agencies who are also involved in this area money that the taxpayers paid to RBS and others to and to make sure that there is a ready supply of bail you out. capital, not just lending, into this whole business Sir Sandy Crombie: I do not think you should spectrum. I think that is a valid thing to do to fill a presume that the banks will be mean. The agreements potential gap in the market, because banks generally have not been made at this stage. provide funding arrangements rather than capital. Chair: Thank you very much indeed to our panel of witnesses. If any of you have anything else you want Q316 Kelvin Hopkins: I would like to look at to add or are burning to say please indicate, but it just numbers. The fact is the capitalisation of £300 remains for me to reiterate my thanks and those of my million, if it was donated simply on a proportionate Committee. I think it has been quite an interesting basis by the major banks, they could do that without evidence session because it has brought out some blinking in terms of the kind of capitalisation that your widely disparate views, perhaps more on the own bank and others have, which is vast in Committee than among the panel of witnesses, about comparison. It is a very small beer compared with how to approach this whole question of charitable what you do, and to be very mean and commercial giving. We are very grateful for your time this about these donations, loans, or whatever they are, morning. Ev 50 Public Administration Committee: Evidence

Written evidence

Supplementary written evidence from Justine Greening MP, Economic Secretary, HM Treasury

I attended your Public Administration Select Committee on Wednesday 16 February to discuss funding of the voluntary sector with my colleague Nick Hurd, Minister for Civil Society. During the discussions we touched on two topics where you asked for more details and there is an additional area where I think it would be helpful to provide your committee with further information.

Firstly you asked for more information about the new “intelligent” forms for claiming Gift Aid which HM Revenue and Customs are developing. The intelligent forms are “pdf” (personal document format) forms that charities will be able to download from the HMRC website using free software, fill in and save to their computer. There will be four new forms: — Charity Application Form (ChA1). — CASC Registration Form (CASC (A1)). — Charities Variation Form (ChV1). — Repayment Claim Form (R68(i)).

Because the forms are designed to be filled in on a computer they have rules and validation built into them to check that the form is filled in correctly. For example, the new R68(i) will automatically add up the totals of the donations received by a charity, ensuring that donations are entered in the correct accounting periods and the form works out the tax relief due.

This prevents certain common errors being made so that when the forms are submitted to HM Revenue and Customs the form is quicker and easier to process. I was asked to confirm whether these new forms would be introduced before the end of the financial year. I have checked the position and am pleased to inform the committee that the forms will indeed be released before the end of the financial year 2010–11.

Additionally, you asked about the differences between these intelligent forms and the Gift Aid database promoted by the Charities Aid Foundation. I can confirm that these are two different things. The Gift Aid database will hold electronically all the details from Gift Aid declarations. These declarations are currently paper based and many charities find the requirement to keep the paper versions burdensome. The Gift Aid database would allow the details from the declaration to be transferred onto the database so the original paper version can be destroyed.

HMRC will soon be publishing details of the technical legal requirements that will need to be satisfied to ensure that any Gift Aid database that is designed complies with the legal requirements for the Gift Aid. These details will enable charities to introduce such databases if they so chose.

Secondly, the issue of how much it costs HM Revenue and Customs to process a Gift Aid claim was raised during the hearing and the figure of £8 was mentioned. I can confirm that in response to a Parliamentary Question in September 2010, the Government released the figure of £5 as the cost of processing a Gift Aid claim. HM Revenue and Customs has since revised this estimate to £8 to include accommodation and other costs.

Unfortunately this figure has led to some confusion and some have assumed this is the cost of processing each donation made by an individual to a charity but this is not the case. This figure relates to the cost of processing one of the claims made by individual charities to HM Revenue and Customs.

There were about 160,000 such claims in 2009–10. However, a single “claim” by a charity does not necessarily equate to a single donation made by an individual. A claim may consist of information about one donation, or many thousands of donations, depending upon the charity, so the cost per donation is actually much lower. HMRC have estimated it costs the equivalent of about 3 pence per donation to process the associated Gift Aid repayment claim made by the charity. HMRC estimate this cost will fall over the next few years as the new intelligent forms and other process improvements make it quicker and easier to process these claims from charities.

I hope your committee will find this further information useful. March 2011 Public Administration Committee: Evidence Ev 51

Supplementary written evidence from National Council for Voluntary Organisations (NCVO) Further to NCVO’s appearance before your committee on 18 January we were asked to write with further suggestions on the topics to pursue with the Minister for Civil Society, Nick Hurd MP. NCVO is the largest general membership body for voluntary and community organisations (VCOs) in England. Established in 1919, NCVO represents 8,400 organisations, from large “household name” charities to small groups involved in all areas of voluntary and community action at a local level: almost half of our members have an income of less than £10,000. Our members include 365 national and 473 local infrastructure organisations, thereby extending our reach still further.

The Impact of the Reduction in Public Spending on the Voluntary and Community Sector There is no doubt that these will be challenging times for the VCS. As you will be aware the voluntary and community sector (VCS) is facing significant reductions in public spending, along with proposals for public service reform and a de-centralisation of power from a central to a local level. The scale and speed of spending cuts is having a significant impact on the VCS. A significant problem facing the sector lies in how to fill the substantial gap left by government funding cuts in the short term before longer term opportunities provided by public service reform come on stream. Giving remains £700 million below pre-recession levels, the end of transitional relief on Gift Aid in April will cost the sector at least £100 million and the increase in the main rate of VAT to 20% will cost an estimated additional £150 million per year. The recession and the subsequent period have been characterised by falling income and rising demand. It is essential that the sector is not seen as a soft-target for cuts and that any reductions in spending are phased in over time. Government must work in partnership with the sector and seek to mitigate the impact of cuts on the VCS and on the people and communities that the sector serves. Partnership working can mitigate the impact of reductions to overall spending levels and can protect investment in services which add particular social and economic value—for example the role that the VCS plays in preventative services.

Statutory Income The voluntary and community sector receives £12.8 billion from statutory sources1, which accounts for 36% of sector income and closely follows income from individuals as the most significant funding stream. The large majority of this funding (£9.1 billion) is comprised of payment for the delivery of services under contract. However it is important to remember that this represents only 2% of total government spending. Given that the majority of statutory funding to VCOs comes from local authorities (52%), decisions made at a local level are of vital importance to the financial health of the sector. We are now entering a critical period as local authorities finalise their spending decisions. Many charities will not know until the end of February or early March what their funding situation is going to be from 1 April. Good quality, well informed and timely decision making is clearly essential in order for VCOs to plan with confidence and to ensure that service quality is not unnecessarily impacted. Increasingly we hear of decisions being taken by local authorities without adequate consideration being given to the impact these cuts will have in social and economic terms. Devon County Council recently announced the removal of all funding for domestic abuse services, cuts to CVS and CAB funding and funding to arts organisations. In Birmingham all five Citizens Advice drop-in offices are to close because funding has been terminated by the city council. Intelligent funding decisions are essential and must be based on well informed evidence about the overall spending on and importance of all services, including those outsourced to the VCS. There are positive examples of local authorities making long term, strategic decisions in partnership with the local voluntary and community sector. These authorities have been making decisions that take account of all budgets and do not target outsourced budgets for cuts. These include local authorities in Merton, Thurrock and East Sussex, amongst others. Staffordshire Council has introduced its own transition fund, to support voluntary and community organisations in moving toward a payment by results model.

The Consequences for Voluntary and Community Bodies of Greater Commissioning of Public Services The VCS already plays a significant role in public services, and there is potential for this to grow. It is important that the full role, skills and attributes of the sector are taken into account and that the role for the sector is not restricted to delivery. The VCS should be engaged in the process to transform services, not simply to be the recipient of transfers of services from the public sector. A shift toward commissioning on the basis of the full economic, social and environmental value of services is positive. Services should be focused on outcomes and this will require changes to the commissioning process. To develop innovative, flexible services 1 NCVO (2010) The UK Civil Society Almanac 2010. Note that these figures relate to 2007–08, the most recent year for which detailed data is available. Ev 52 Public Administration Committee: Evidence

will require proportionate risk taking—risk needs to be accepted and managed and the burden of risk shared fairly amongst partners. A more decentralised model for public services and a greater role for communities and community groups will be part of the solution in seeking to make services more responsive and accessible. Right to challenge proposals will be one mechanism for this, though there are important issues to be resolved around how the criteria to determine a successful challenge should be drawn up. Where a service is successfully challenged, then this should result in a full commissioning process, as long as appropriate, rather than simply a procurement exercise to replace one provider with another. It is important that the fact that services are being challenged is taken seriously and that a full assessment of where improvements and changes are needed is undertaken. The transferring of assets to communities is a further welcome step, but it is important that these transfers are properly configured and that the reality is not simply a transfer of liabilities. There are currently obstacles to market entry and a lack of a ‘level playing field’ between the VCS and other sectors, for example in the way that VAT is levied. Very significant barriers for the VCS include access to working and development capital and cash flow. It is likely that a shift toward a payment by results model would exacerbate these problems if decisive action is not taken. The Big Society Bank is a part of the solution to that problem, but VCOs must be supported through the transition if government’s ambitions for more diverse and plural public services provision are to be realised.

Methods for Increasing Non-statutory Funding and What Role the Government should Play in Supporting This Social investment Social investment is likely to form an increasingly significant role in financing the sector in the coming years. To that end, NCVO looks forward to seeing the details of the Government’s social investment strategy and the particular role that government can play in ‘joining up’ the different parts of the currently fragmented market. Getting the right tax incentives in place is going to be a pre-requisite to stimulating market growth and development. Whilst recognising the current fiscal position, the right tax reliefs when carefully targeted can generate overall returns over and above the investment from government many times over. We would suggest that CITR (Community Interest Tax Relief), which is currently the principal tax incentive for social investment should be the first area of attention. Introduced in 2002, take-up has arguably been disappointing and we would encourage government to broaden the scope of organisations that qualify for CITR and to work with the VCS and social enterprise to consider how CITR might be made a better “fit” for the sector. The Big Society Bank has the potential to provide significant new sources of funding for voluntary and community organisations. NCVO has long called on government to introduce a social investment wholesale bank and we recognise the potential that the Bank will have in making wholesale capital available to the retail institutions that support the sector. It is important to note, however this is a long term project and that the first funding will not be in place until the autumn. The impact of spending cuts will take effect from April 2011 and it would therefore be extremely helpful if consideration could be given to significantly increasing the scale and scope of the Transition Fund and the resources available to it. Despite a short timescale and restrictive criteria for organisations that were eligible to apply, the Minster has indicated that a “multiple” of organisations supported applied for the fund and we would welcome clarification from the Minister on how many organisations applied. Further announcements around additional funding for the Big Society Bank on 9 February signal positive intent from government and a good start in growing the social investment sector. To give confidence to the sector in planning ahead, a clear timeline on when the Bank will be fully functional would be of assistance and government should consider the best ways in which to work with the VCS to promote investment readiness to ensure that maximum benefit from the Bank is derived.

Philanthropy NCVO supports many of the recommendations and the acknowledgement of a need for a shift in behaviour in the Giving Green Paper and will feed in evidence formally to the Cabinet Office. In addition to proposals in the Green Paper, the Government could consider a one off matching scheme, or a challenge fund, backed by government to collect bank bonuses and match (or part-match) these to invest in community projects. This could be high profile, gain considerable public support and raise awareness of wider government around giving and philanthropy. NCVO’s Funding Commission, which reported in December includes the following recommendation, where government support would be very positive: a Better Asking Campaign in order to improve the quality and effectiveness of all forms of fundraising, especially by smaller and local CSOs. It’s worth noting that 75% of charities have two staff or fewer (National survey of third sector organisations 2008) and are therefore unlikely to have any professional fundraising capability. As such, there is a huge potential for trustees/volunteers to lead a movement for “Better Asking”. Public Administration Committee: Evidence Ev 53

NCVO has also long argued that government should examine the potential of lifetime legacies to promote philanthropy. We would encourage government to work closely with NCVO, CAF, CFDG and the wider sector to conduct robust research into the potential for lifetime legacies. Lifetime legacies could potentially free up philanthropic capital relatively quickly, as donors would choose to make donations during their lifetime rather than donations being made from their estate on death. Clearly, we would want lifetime legacies to be configured in a way that encourages and allows benefit for the mass affluent (rather than a small number of very high net worth individuals) and also in a way that would channel much needed funds into the VCS and civil society as a whole.

How the Tax System, including Gift Aid, could be Changed to Better Support Charities Gift Aid NCVO was part of the Treasury’s Gift Aid Forum, which has made various recommendations to government on taking the scheme forward. We are now members of the HMRC Charity Tax Forum which is examining wider tax issues and their impact on the VCS. Gift Aid remains a success and an important source of funding for the VCS. We have called on government to promote its ongoing success by joining with the sector to raise awareness and updating and simplifying guidance. NCVO supports calls for an online database for Gift Aid. Online filing would reduce paper, workload and bureaucracy for both the VCS and government. We accept that transitional relief on Gift Aid will end in April—but the loss of revenue of around £100m for the VCS, at an already challenging time, does need to be factored in to discussions around the overall financial health of the sector. It is important that the use of technology—including mobiles and social networking—in fundraising is reflected and supported in the Gift Aid system. We would urge government to urgently examine the potential for higher rate re-direction (where higher and highest rate taxpayers could opt to easily re-direct the additional Gift Aid relief that their donations attract to charity).

Irrecoverable VAT Irrecoverable VAT is a significant issue for the VCS—it threatens the existing work of voluntary and community organisations (VCOs) at a challenging time and will act as a disincentive to developing the sector’s public service delivery role. NCVO has raised these issues directly with both the Prime Minister and the Chief Secretary to the Treasury as well as with the Minister for Civil Society. When the VAT system was drawn up, it failed to recognise the position of charities, as many services provided by charities are either VAT exempt or fall outside the scope of VAT. This means that VAT can not be reclaimed on the money they spend on supporting their activities. Irrecoverable VAT costs charities significant sums—estimated 4% of total expenditure (much higher in some cases) which is clearly serious in light of the economic and financial climate in the VCS. Working with sector colleagues, including the Charity Tax Group, NCVO has identified four priority areas: 1. VAT on social welfare services, where charities are complementing/substituting government provision: VCOs should be compensated here and not have resources taken from them in the pursuit of delivering public services. This would ensure fair treatment across local govt/private sector/VCS. 2. VAT on fundraising: Gift Aid is hugely valuable to the VCS but the money invested in raising these donations is then subsequently taxed. Government might consider examining a matching grant to cover VAT on fundraising costs. 3. Joint ventures/shared services: HM Treasury is looking at this issue. The legislative solution lies in implementing the exemption in Article 13 A (1) (f) of the EU Sixth VAT Directive. 4. Repair, construction and maintenance of social welfare housing and all charitable buildings: repair, upgrade and building maintenance a costly VAT item for UK VCOs. Government could look at a matching grant scheme to cover the costs of building work, which could then be re-invested in further building work. February 2011

Written evidence from National Association for Voluntary and Community Action (NAVCA) NAVCA is the national voice of local support and development organisations in England. We champion and strengthen voluntary and community action by supporting our members in their work with over 160,000 local charities and community groups. NAVCA believes that voluntary and community action is vital for vibrant and caring communities. We provide our members with networking opportunities, specialist advice, support, policy information and training. NAVCA is a vital bridge between local groups and national government. Our specialist teams take a lead on the issues that matter most to local support and development organisations. We influence national and local government policy to strengthen local voluntary and community action. Ev 54 Public Administration Committee: Evidence

Introduction 1.1 The Government’s budget deficit reduction plan has resulted in significant cuts in the public funding to the local voluntary and community sector; as a result, many organisations are facing closure or a severe reduction in service to the communities they serve. Many NAVCA members are working hard to help local voluntary organisations and community groups identify alternative sources of funding to help them continue to run the vital services they offer to local communities. We welcome government initiatives aimed at increasing support from business for voluntary organisations and community groups. NAVCA would welcome incentives from government aimed at breaking down barriers between the sectors, particularly between business leaders and voluntary and community sector leaders. We are, however, extremely sceptical about the capacity of private investors and philanthropists to fill the gap left by public funding. 1.2 We are very concerned, however, that many voluntary organisations and community groups are being stretched beyond their capacity to adapt due to: (i) the speed with which the cuts are being implemented; (ii) the “front loading” of cuts to the local government settlement grants, and (iii) the way in which cuts are being implemented locally. 1.3 The consequence is that many essential frontline services are facing real and immediate threats to their continuing delivery. 1.4 We think it is astonishing that the Prime Minister has called on local authorities not to cut funding to voluntary organisations and charities but instead to look elsewhere for their savings and yet he is ignored. His commitment to achieving a Big Society is being undermined by deep, rapid and unfair local authority cuts. And yet neither he nor the Secretary of State for Communities and Local Government nor the Minister for Civil Society takes any action. We think the Committee should ask the Minister why this is the case. 1.5 Our comments focus on the experiences of the smaller, local voluntary organisations and community groups supported by our members.

The Impact of the Reduction in Public Spending on the Voluntary and Community Sector 2.1 Some local authorities used central government grants such as Area Based Grant (ABG) and Working Neighbourhoods Fund (WNF) to replace their own voluntary and community sector grants programmes; this has had a major impact on the funding of many local voluntary and community organisations, including local support and development organisations.2 The consequence has been that as funding has been withdrawn by central government it has not been replaced by local authorities; many have simply passed on the reduction to local voluntary organisations and community groups. 2.2 The long term decline in local grant funding has left many local voluntary organisations and community groups, including NAVCA members, highly vulnerable to the ending of central government funding programmes; a particular problem in deprived urban areas where ABG and WNF were targeted and where social capital is weakest and support for social action is most needed. If resources are not available to sustain local voluntary organisations and community groups, including NAVCA members, these organisations will close, only to be invented at great expense in the future. 2.3 NAVCA members report that frontline groups supporting children and young people are disproportionately suffering from spending cuts. Examples include: (i) In York 33 local voluntary and community sector organisations have lost funding as a result of the termination of the Youth Community Action pilot and cuts to the Early Intervention Fund. (ii) In Sheffield, a number of voluntary organisations and community groups, primarily those in receipt of area based grant from the Children and Young People’s Service, have been given six months’ notice that they will receive less funding than expected in the current year. (iii) In Surrey, the Children’s Fund contracts have been terminated six months early, to the detriment of a number of local voluntary organisations and community groups. (iv) In Burnley, the Children’s Trust small grants scheme has been suspended. The scheme awarded grants up to the value of £2,000 and its closure affects many small groups providing preventative services to young people. (v) In Gloucestershire the prevention fund has been cut by 46%, without an effective risk assessment or an equalities impact assessment. As a result a number of organisations have experienced a 100% cut in funding, leading to the closure of one service at least; a participation service run by Action for Children. A further 30 organisations have received a 19% cut. NAVCA’s member in Gloucestershire argued against the principle of across the board cuts in the partnership to no avail. (vi) In Eastleigh, children’s services have been affected by reductions in area based grants, causing the cancellation of a local authority grants round in the current year. 2 Local support and development organisations include councils for voluntary service, volunteer centres and rural community councils. Public Administration Committee: Evidence Ev 55

2.4 Another service area affected is the provision of local support and development services, such as funding advice, training, organisational development and community development. Some statutory bodies fail to see that cuts to local support and development organisations have a major impact on frontline organisations and local communities. The loss of such services makes it difficult for local people to join, create or develop a charity, social enterprise or community group, which, we consider symptomatic of a short term approach to budget reduction. Furthermore it fails to appreciate that social action will only flourish where the necessary support and development services are available. (i) In Kirklees a tendering exercise for infrastructure services to the value of £269,000 was terminated without warning after months of discussions and work. This threatens the existence of Voluntary Action Kirklees and the Volunteer Centre and the training it offers to 150 charities and 2,500 volunteers. (ii) Voluntary Action Wakefield was told in July that it would lose the majority of its funding with immediate effect. This means they no longer have funding for their volunteer centre, ICT support and funding advice. (iii) NAVCA’s member in the City of London CITY.COMM has been told by the City of London Corporation that it will not receive funding after the end of this financial year. It is now radically re- thinking what services, if any, it can continue to offer to groups in the Square Mile. (iv) Nottingham CVS has received a cut of £100,000 from the local strategic partnership for its community engagement work, which seeks to involve local people in decision making. (v) Wolverhampton Voluntary Sector Council took over a failing volunteer service in Jan 2010. They got funding for one post and then secured enough WNF for two further posts. In the past year 1,500 volunteers have been placed with over 140 local voluntary organisations and community groups. Over 900 of these have also been placed on training courses or accessed employment through our service. WNF funding has ended and unless more funding can be secured this service will end. (vi) In Hammersmith and Fulham the local authority is selling off properties that it considers “surplus to requirements” to raise income. A number of such properties are in everyday use providing office accommodation to voluntary and community sector organisations. The sale of one such property, Palingswick House, in order to accommodate a proposed Free School threatens the survival of 21 community groups including 11 that work with refugee communities locally. (vii) In November 2010 NAVCA asked its members (organisations that offer support to the local voluntary and community sector in every part of England) about their funding prospects. We found that their paid workforce will reduce from 6,800 posts to 5,100 next year; this constitutes a cut of 25% in support to local groups. Most are frontline staff—community development workers, volunteer centre organisers, youth volunteering workers, funding advisers and the like. This was the result of cuts in government programmes like the Future Jobs Fund and the Working Neighbourhoods Fund and cuts to local authority and NHS budgets that support local voluntary action. (viii) Our best estimate so far is that approximately 26,000 jobs in the local voluntary sector will be lost by September 2011. This represents about 25% of the local sector’s paid workforce. This will inevitably produce a dramatic decline in local services for people in need. 2.5 The termination of the Future Jobs Fund (FJF), which ended in June, and the Department for Work and Pensions funded Volunteer Brokerage Scheme (VBS), which will finish in November, will have a significant impact on the sector’s capacity to help people into employment through volunteering: (i) Sefton CVS managed the voluntary and community sector FJF offer and at the beginning of July was successful in getting 106 placements through 36 voluntary organisations. The loss of this scheme will affect the voluntary organisations involved and the employment prospects of those who had a placement. (ii) In Staffordshire and Stoke on Trent, 28 people were placed in the sector under the FJF and Community Action Derby celebrated placing their 100th employee in June, having also helped over 20 young people into employment. (iii) Ealing CVS used the Volunteer Brokerage Scheme to give new volunteering opportunities to many long-term unemployed people—especially young unemployed people—as a route back into work. We have had similar messages from Voluntary Action Stratford on Avon District, Bradford CVS, Volunteer Centre Kensington and Chelsea and Voluntary Action North East Lincolnshire. The general view is that the scheme recovered from early setbacks and had latterly been very successful. Ending the scheme is a direct cut in frontline voluntary and community sector services and affects grassroots community volunteering. 2.6 Although it covers all service areas, it is relevant to mention the effect of cuts in local councils’ grants programmes. Cuts to grant funding disproportionately affect small organisations—the ones that are at the heart of the Big Society and are most likely to help get people involved in social action and volunteering. The current round of cuts to grant funding hit especially hard after years of shrinking grants budgets. Small grants programmes are a low cost way of supporting voluntary and community action and cutting them disproportionately reduces social action and volunteering. Cutting grant funding is a short term measure that will create long term pain. Ev 56 Public Administration Committee: Evidence

(i) A typical example of this is in Hackney where the council has proposed a 33% (£250,000) reduction to the Community Grants Programme. This reduction will result in the loss of 46 jobs and 230 volunteers, meaning a loss of services to 5,600 current beneficiaries. (ii) In Northamptonshire the £1.6 million Strategic Grant is being ended. The majority is going to service heads to commission services and £200,000 will be left for a small grants fund. This affects 93 organisations, including social care organisations, community transports schemes and advice and information services. (iii) Bolton is looking to cut its small grants budget by £89,000. This will affect the smallest community groups within Bolton who work tirelessly to provide a huge range of services to local residents and to enhance the quality of life within Bolton. (iv) Croydon Council has announced its intention to move away from funding the voluntary and community sector through grants and instead fund the sector almost entirely though contracts. It proposes cutting the strategic grants budget from £1.8 million to £600,000. This will mean 41 out of the 47 organisations previously funded would lose all funding, including a number of BME organisations and the Rape Crisis Centre. This is a particular concern as Croydon has gained Beacon Council status for its support to the third sector. (v) Nottinghamshire County Council is cutting their grants budget by a third, from £3.3 million to £2.1 million. The original cut was nearly £500,000 more but the council reduced the funding cut after it was severely criticised for falling to consult and was threatened with legal action. Nearby Derby are also making similar cuts to their grant budget, from £2.8 million to £1.9 million. (vi) In Newcastle the loss of a number of programmes funded by national government has contributed to a 78% cut in the funding local voluntary organisations and community groups receive from the local authority. This will put people at risk, remove vital services and will ultimately cost the council more money over time, as much of the work local voluntary organisations and community groups do is preventative work. (vii) The Local Area Agreement Performance Reward Grant (LAA PRG) has been cut by 50%. In many areas because this funding was not ring-fenced, it has been used to support the local voluntary and community sector. This funding has previously had a significant impact on the level of grant funding available to voluntary organisations and community groups, supporting significant increases in volunteering and social action. Colchester Community Voluntary Service used LAA PRG to support 60 local voluntary groups and is concerned that although it has an exit strategy in place, it is not designed to cope with the early termination of the funding. In Chelmsford this cut has meant voluntary organisations and social enterprises have had to end early a number of successful projects. Basildon, Billericay and Wickford Council for Voluntary Action used LAA PRG money to support people with enduring mental health problems to get volunteering placements as a step towards returning to employment. They have been asked to model the impact of 50% and 75% cuts in funding. In Islington the cut to the LAA PRG fund means that previously promised improvements to voluntary sector community centres, increasing internet access to deprived communities, will not now proceed.

The Consequences for Voluntary and Community Bodies of Greater Commissioning of Public Services 3.1 Recent changes in the commissioning of public services have opened up new opportunities for some voluntary organisations to get involved in public service delivery. In many service areas, local voluntary organisations and community groups are well-placed to deliver innovative, cost effective support that meets the needs of local communities. In practice, however, commissioning has also created significant difficulties and barriers, particularly for smaller local voluntary organisations and community groups. Many are effectively excluded from the delivery of local services because of poorly designed commissioning and procurement processes.

The vital role of local grants 3.2 NAVCA believes that grants should be an essential part of the funding mix for local voluntary organisations and community groups and have a vital role in strengthening local voluntary and community action. The widespread shift from grant funding to contracting has resulted in a significant loss of social value for communities, because the wider value of grant funded services has not been appropriately evaluated in tender criteria. We believe this needs to be addressed urgently if the Government’s aspirations for the Big Society are to be realised. 3.3 We would urge the Committee to seek reassurance from the Minister for Civil Society that the Government will take action to ensure that statutory grant funding remains part of the local funding mix.

Impact on independence, accountability and ability to innovate 3.4 In practice, much commissioning practice has not been outcome focussed, services have often been over- specified and tendering and contract management processes have left little scope for voluntary organisations and community groups to innovate. This has restricted the ability of voluntary organisations and community Public Administration Committee: Evidence Ev 57

groups to deliver flexible, creative services in response to the needs and preferences of their beneficiaries. Accountability has shifted to contract managers and away from local communities. The independence of voluntary organisations and their ability to campaign and to challenge statutory bodies has often been compromised as a result.

Tendency to focus on process rather than outcomes 3.5 Tendering processes have placed a considerable burden on the sector, particularly smaller local organisations. Onerous bidding processes, frequently with tight timescales, divert time and resources away from frontline services, placing enormous pressures on small, local charities. Contract management processes are frequently disproportionate, with burdensome monitoring requirements and, in some cases, an inappropriate level of micro-management of contracts. Again, this diverts valuable resources away from the front line.

Support for market development 3.6 Local commissioners have not taken a sufficiently proactive approach to developing the local voluntary and community sector market and often lack a good understanding of the local voluntary and community sector, its value and diversity. NAVCA members are ideally placed to support smaller voluntary organisations and community groups to enable them to develop their bidding capability, but this infrastructure support needs to be properly resourced. Funding for this type of support is all too often lacking. 3.7 We would recommend that PASC raises with the Minister the importance of strong infrastructure to develop the local voluntary and community sector market. The Minister may refer to a new Volunteering Infrastructure Fund of £43 million and to a small Modernisation Fund for infrastructure. Both are welcome but are insignificant when compared to the cuts in funding made recently by local councils and primary care trusts in their funding for local support and development charities.

Payment in arrears and payment by results 3.8 Payment in arrears systems, for example, in the welfare to work market and health and social care contracts, present a major barrier for smaller voluntary organisations and community groups and can result in cash flow problems which threaten the viability of organisations. There is a real risk that the extension of payment by results could exacerbate this problem, preventing smaller organisations from entering the market, as they do not have the working capital to continue operating whilst they await payment. 3.9 The Social Impact Bond pilot at HMP Peterborough is an interesting model, which has the potential to overcome this problem. However, we will not have definitive evidence for its effectiveness for some time. We do not consider payment by results to be appropriate for small contracts and grants, where the cost involved in measuring results can be wholly disproportionate to the size of the investment. 3.10 We are not convinced that the proposed Big Society Bank will offer a solution as we understand that the social finance intermediaries that the Bank will use are likely to offer loans not grants. Many local charities will require help in order to make good use of a loan in connection with the delivery of a public service. For example, a youth organisation bidding to take over a redundant local council building in order to provide a youth training centre would need to employ an architect, surveyor and other professionals. Whilst some support may be available on a pro bono basis, much would not. So, a “development grant” would be essential. In another example, a charity providing therapeutic services for people with mental health problems, aspiring to bid for a local council contract in social care, may need to introduce new quality systems to meet a future contract specification. Again a “development grant” would be essential. Our view is that without “development grants” many local charities will not be able to access loans from the Bank’s distributors. 3.11 We hope the Bank will require its distributors to take a high level of risk. Innovation in service delivery is vital and this requires risk taking. A loan which results in learning about what works in service delivery should not be regarded as a “failure” even if a local charity closes and the investment is lost.

More than service providers 3.12 In many areas voluntary organisations and community groups are increasingly being viewed by commissioners only as service providers, or potential service providers, which can result in the sector is being excluded from discussions about service design due to a perceived conflict of interest. The vital role of voluntary organisations and community groups in contributing to needs assessment, shaping service design and acting as a voice for local communities, is often overlooked. Resources for campaigning and local voice work have been severely squeezed, partly owing to the difficult economic environment, but also as a consequence of the shift from “core” grant funding to contracts for the delivery of services.

Supporting the sector’s engagement 3.13 It is essential that there are good local infrastructure services in place to facilitate discussions between the sector and commissioners, ensure that the sector is able to contribute fully to all stages of commissioning processes, champion good practice and support development of the market. Local support and development organisations have been carrying out this work in many areas. We have carried out a study into this work and Ev 58 Public Administration Committee: Evidence

produced a report and case studies3 that evidence their vital role. Some of the roles local support and development organisations have successfully carried out to support intelligent commissioning include: (i) Being commissioned to carry out needs analysis. (ii) Facilitating the involvement of voluntary organisations and community groups in developing service specifications. (iii) Developing the market—through supplier directories and meet the commissioner events. (iv) Supporting voluntary organisations and community groups with tendering. (v) Capacity-building support for voluntary organisations and community groups, including training and mentoring. (vi) Ensuring voluntary organisations and community groups are involved in developing commissioning strategies. (vii) Coordinating the involvement and representation of voluntary organisations and community groups on commissioning boards. (viii) Designing commissioning processes. (ix) Demonstrating the value of the sector to commissioners. (x) Challenging poor commissioning practice. 3.14 We recommend that PASC raises with the Minister the need to ensure that local support and development organisations are provided with sufficient resources for them to continue their essential role in enabling good local commissioning.

Training for commissioners and procurement officers 3.15 Commissioners and procurement officers do not fully realise and use the full extent of the powers they have to make good funding decisions, give grants, and use flexible and proportionate procurement processes. In particular, the flexibilities available for Part B services are underused. This is related to a high level of risk aversion and fear of prosecution in relation to procurement regulations. We recommend that all training for commissioners and procurement officers, including the National Programme for Third Sector Commissioning, should include these issues as mandatory, as well as relevant central government departments, for example, the Office of Fair Trading and the Efficiency and Reform Group. 3.16 We would welcome measures to reduce the bureaucratic burden of commissioning on local voluntary organisations and community groups. We believe that much of the unnecessary bureaucracy arises as a result of lack of understanding of the commissioning and procurement regulatory framework and high levels of risk aversion.

Appropriate allocation of risk 3.17 Commissioners often fail to consider the wider implications of transferring inappropriate levels of risk onto small voluntary organisations and community groups. For example, contracts sometimes include clauses such as unlimited liability and compensation, disproportionate insurance levels or bond guarantees. Payment by results systems can also transfer inappropriate levels of risk onto voluntary organisations and community groups, for example, by imposing penalties for failure to meet targets where the level of demand is uncertain. A robust process of proofing all tender documentation to assess its suitability for smaller voluntary organisations and community groups and to check Compact compliance would help to achieve a fairer balance of risk.

Recognising the value of the local voluntary and community sector 3.18 Commissioners need to adhere to the principles of good practice outlined in the Cabinet Office report “Better Together”.4 These include: communication, transparency, strong leadership and robust evidence. Local voluntary organisations and community groups are embedded within their local communities and this, together with their independence from statutory providers, means they are often more trusted and better able to reach and support the most marginalised and socially excluded communities. The far reaching public service reforms, together with the exceptionally difficult financial environment, means there is an urgent need for the Government to ensure that small, local voluntary organisations and community groups survive and are supported appropriately to play a role in delivering innovative, cost-effective solutions to the current challenges. 3.19 Infrastructure support to small, local voluntary organisations and community groups, to enable them to play a role, needs to be seen as a central plank of delivering the Big Society. The Government needs to aware of this priority and of what could be lost if local voluntary organisations and community groups are not appropriately supported. 3.20 We recommend that the Committee asks the Minister whether he recognises the high level of risk posed by local authority funding cuts to infrastructure services and what he proposes to do about it. 3 NAVCA (2010) A Bridge between Two Worlds; a study of support and development organisations and intelligent commissioning. 4 http://navca.org.uk/news/bettertogether.htm Public Administration Committee: Evidence Ev 59

Methods for Increasing Non-statutory Funding and what Role the Government Should Play in Supporting this 4.1 We welcome government initiatives aimed at increasing support from business for voluntary and community organisations. 4.2 NAVCA would welcome incentives from government aimed at breaking down barriers between the sectors, particularly between business leaders and voluntary and community sector leaders. 4.3 In particular, NAVCA recommends that government: (i) provide incentives for increasing pro bono work with communities and voluntary and community organisations in greatest need. Rather than re-inventing the wheel, NAVCA believes that the Office for Civil Society should require its strategic partners to work with BITC to ensure voluntary and community organisations throughout England have access to support from the local business community; (ii) provides incentives to encourage more local philanthropy and corporate social responsibility to build local endowments to provide sustainable grants to support voluntary action. Community foundations exist across the UK and between them held nearly £200m in endowments in March 2008, mostly from private sources. They promote local philanthropy and giving and are a source of grant funding to encourage voluntary action; (iii) build upon Prime Minister’s call5 to business leaders to support volunteering; this should include encouraging their employees to become trustees of local charities—good trustees provide strong and sustainable leadership and raise the standard of local voluntary action; (iv) support the Public Services (Social Enterprise and Social Value) Bill to provide incentives for local businesses to increase their involvement with local voluntary and community groups by embedding social values in all public sector contracts; (v) support the Banking and Financial Services (Community Investment) Bill “to make provision for a voluntary mechanism through which banks, building societies and other providers of financial services can support community projects through reinvestment of part of their profits and assistance in kind”; (vi) establish two-year transition funds for local support and development organisations as local state funding declines, to enable them to develop new business models based on alternative funding and to provide external support to transform under performing organisations. Specifically, it would enable providers of infrastructure services to: — become more entrepreneurial by developing earned income from both service provision and asset use; — downsize in a carefully managed way, developing new relationships with the local private sector, local councils and the new local NHS structures, particularly GP commissioners; and — develop new types of fundraising including Community Shares, payroll giving, Gift Aid and “fiscal sponsorship”.

How the tax system, including Gift Aid, could be changed to better support charities NAVCA looks to NCVO to represent the sector’s concerns and we are aware that their submission covers the matter of Gift Aid. February 2011

Written evidence from the Charities Aid Foundation (CAF) 1. Introduction 1.1 The Charities Aid Foundation (CAF) is a registered charity that aims to help charities and social enterprises make the most of their money. CAF provides financial, investment and fundraising services and works directly with tens of thousands of charitable organisations across the UK and internationally. 1.2 CAF provides services and support to thousands of individual donors, enabling them to give tax- effectively to charitable organisations across the UK and around the world. 1.3 We also work directly with around 75% of the FTSE 100 companies, providing practical and advisory services to support and facilitate effective corporate community investment. CAF operates the largest payroll giving agency in the UK, “Give As You Earn”. 1.4 CAF has a strong history of campaigning for changes in policy and legislation in order to improve the giving environment and to secure supportive legal, fiscal and regulatory conditions for donors, charities and social enterprises. Our knowledge and understanding—gained through direct experience and research—makes us a trusted voice on giving and the effective use of charitable funds. 5 See http://uk.reuters.com/article/2011/01/20/health-us-cameron-disabled-idUKTRE70J5QE20110120 Ev 60 Public Administration Committee: Evidence

1.5 CAF does not itself receive any public funding and does not have any contracts to provide services. However, many of the charities we work with do deliver public services and have experience of the commissioning environment. 1.6 CAF has a social investment fund, CAF Venturesome, which has been operating since 2002. As a result of this, we have developed influential thinking on the requirements for successful social investment and how the market as a whole could be developed. 1.7 CAF’s Chief Executive, Dr John Low, was a member of the NCVO Funding Commission, which published its final report in December 2010.6

2. The Impact of the Reduction in Public Spending on the Voluntary and Community Sector 2.1 The pressure on government (both national and local) to reduce budgets following the Spending Review is inevitably having a huge impact on CSOs. Funding cuts have been anticipated by the sector for some time, but the true impact of commissioning decisions is only just starting to be felt. 2.2 The sector faces the combined impact of increasing demand for services, public spending cuts and wider economic difficulties that both increase costs and place strain on individual and corporate support. 2.3 The Trade Union Congress has recently stated that the sector is set to lose £4.6 billion as a result of austerity measures. 2.4 A group of infrastructure and umbrella bodies have launched a joint initiative to collect evidence on the impact of the spending cuts. The “Voluntary Sector Cuts” website allows CSOs to register their own experiences of cuts. This gives an up to date source of information on the evolving situation.7 2.5 It is worth noting that the NCVO’s Charity Forecast Survey, carried out in December 2011, shows that charity leaders’ confidence levels in their organisation’s financial situation is significantly lower than at any point in the previous three years. Over two-thirds of respondents (69%) predicted that the financial situation of their organisation would worsen over the next 12 months. 2.6 In October 2010, the Government announced a transition fund of £100 million available to CSOs experiencing difficulties as a result of public spending cuts. Charities applying for funds were required to “have evidence, or have substantial reason to believe, that between April 2011 and March 2012, [your] organisation will experience a reduction of at least 30% of the taxpayer-funded income you receive for the delivery of front line public services in England.” The fund had an application window of just over 7 weeks (including the Christmas period) which closed on 21 January 2011. For many CSOs it will have been impossible to predict their funding situation and to finalise their business plans in the short-term, as decisions on statutory funding are often communicated by commissioners at the last minute. Many of the recent examples in the press of CSOs that have suffered severe funding cuts bear this out, as in many cases the level of the cuts could not have been foreseen and the CSOs were only told about them at a very late stage. The Treasury’s “annuality” requirements also mean that all grants must be spent by March 2012, which will put pressure on the CSOs receiving funding and limit the positive impact that the transition fund is be able to have during this critical period. A phased approach to distribution would make it easier for organisations to access this support as it becomes necessary.

3. The Consequences for Voluntary and Community Bodies of Greater Commissioning of Public Services 3.1 Basic principles of Commissioning- Engagement, Outcomes and Value 3.1.1 In order for commissioning to really benefit CSOs, it is important that it is not just done more, but that it is done in the right way. If the use of commissioning increases without resolving many of the issues currently faced by CSOs that deliver services, it will not benefit them at all. 3.1.2 Commissioning should be based on clearly defined outcomes, which are determined through a meaningful process of engaging with citizens and service users to establish their needs and priorities. 3.1.3 Commissioners should have strong ongoing relationships with potential providers from the public, private and civil society sectors, so that they understand the marketplace available to them and the strengths and weaknesses of different organisations. 3.1.4 The design and procurement of services should be centred on finding the best way of delivering the desired outcomes for the best value. “Best Value” must be about a balance of wider economic, environmental and social factors, and not be seen as simply synonymous with “lowest cost”. This is a problem currently, and leads to the “race to the bottom” where organisations bidding for contracts try to undercut one another on price, often to the detriment of quality. This does not represent “value” for service users or citizens. 6 http://www.ncvo-vol.org.uk/fundingcommission 7 http://voluntarysectorcuts.org.uk Public Administration Committee: Evidence Ev 61

3.1.5 CSOs should not be seen as “the cheap option” for service delivery because they are able to draw on charitable income and volunteers. Commissioners must be willing to pay an appropriate price for services. It is entirely unreasonable to expect charitable income or volunteer labour to subsidise their costs.

3.2 Proportion of Services delivered by CSOs 3.2.1 The proportion of services delivered by CSOs in a given locality or service area should be driven by the availability of organisations in the marketplace that are able to demonstrate their ability to deliver good value outcomes, and not by any ideological desire to favour one sector or another. For that reason, the Government’s suggestion of setting targets for the proportion of services delivered by CSOs is not a good one, and may well result in below-standard services, a loss of value or a distortion of the marketplace. 3.2.2 Similarly, any decision about in which services areas it may or may not be appropriate to commission from CSOs that is based on ideology is likely to prove problematic. Any such decision should be demand- driven.

3.3 Payment by Results 3.3.1 The move to payment by results could be a positive thing for CSOs, as long as those results are based on agreed outcomes. There have been complaints from CSOs that current service delivery contracts proscribe what is done to such a degree that it is difficult for them to deliver the best value and outcomes. By focusing on what is achieved and not specifying how (apart from general standards of governance, legality etc), it should be possible to allow service deliverers far more freedom to operate in new and innovate ways that produce good outcomes. 3.3.2 There are clear risks for CSOs that will arise from payment by results. The most obvious of these is the gap in working capital that comes from end-loaded contract payments. Many CSOs (particularly smaller ones) may be able to demonstrate an approach that could deliver great outcomes, but be unable to cover the costs of the activities needed to produce those outcomes, because they will not get paid until the outcomes are actually achieved. This is a problem for CSOs, who often have no assets against which to secure lending, as they are unable to access commercial capital and the availability of social investment is limited.

3.4 The Right to Challenge and Employee-Led Mutuals 3.4.1 The “right to challenge” existing public service provision contained in the Localism Bill is probably the most substantive of the Government’s “Big Society” policies yet announced. In principle it could provide a huge opportunity for CSOs to challenge poorly-delivered services and open them up to a commissioning process. Obviously it is important that the general points about how commissioning is done apply here too. 3.4.2 It is clear from Government announcements that the right to challenge does not apply only to existing CSOs, but also to new community organisations that are formed specifically for the purpose and to new employee-led mutuals spun out of the public sector. Indeed, there is an implication that it is primarily these sorts of organisations that the Government is interested in. 3.4.3 The focus on new entities formed specifically to challenge and bid for services raises issues around funding. How are these new bodies going to fund the costs of starting up, challenging and bidding successfully and then providing effective services? Will they be able to recoup their capital costs through subsequent service delivery contracts? If so, will they not represent quite an expensive option? If the intention is to leverage non- state funding through philanthropy and social investment, it is unclear how this would work. By their nature these organisations would have no track record to demonstrate their success, which would make fundraising extremely difficult. 3.4.4 The possibility of new special-purpose entities arising to deliver services will also have an impact on the way that commissioning is done, and in particular on the lengths of service delivery contracts. In order for it to be an appealing or even viable proposition for a new entity to be formed to bid for a service, there must be sufficient confidence that a successful bid will guarantee a contract for a reasonable period of time (which may be at least 10 years). If there is no such reassurance, it is very hard to see why community groups or groups of public sector workers would take the financial risk of putting themselves significantly out of pocket or out of work when the reward is only a short term contract that may not be renewed.

3.5 Measuring Outcomes and Social Impact 3.5.1 It is well-known that both outcomes and social impact are difficult to measure. However, if (as they should be) outcomes and a broader notion of “value” are put at the heart of the commissioning process, there will be a real onus on commissioners to face up to this difficulty. In order to ensure that taxpayers’ money is being spent effectively, it must be possible to quantify the non-financial aspects of the value that service deliverers are able to offer. 3.5.2 The civil society sector has done, and will continue to do, a lot of work in developing methods of measuring social impact. However, the sector should not be expected to bear the entire burden of funding this development. Building the resources and skills for effective measurement will be expensive, and when public Ev 62 Public Administration Committee: Evidence

sector commissioners themselves are in part driving demand for impact measurement they should expect to shoulder a fair proportion of the cost of developing it.

4. Methods for Increasing Non-statutory Funding and what Role the Government should Play in Supporting This 4.1 Individual Giving and Philanthropy 4.1.1 Charitable giving is an essential facet of a healthy and strong society. For CSOs, voluntary income from individual donors can help maintain independence and resilience as well as providing a mandate through citizen support. 4.1.2 UK Giving 2010 shows that individuals gave £10.6 billion in 2009–10.8 This is a real increase of £400m compared with the previous year, but does not match pre-recession levels. This figure is based on ONS omnibus data and it is assumed that this does not capture an estimated additional £1bn in major gifts from individual philanthropists. 4.1.3 CAF’s recent research report, “The World Giving Index”9 demonstrates a strong correlation between participation in giving and levels of wellbeing. Existing attempts to promote giving have primarily focused on the benefit to the organisation or individual receiving help. However, those seeking to stimulate giving should also look to highlight the reciprocal benefits it carries in terms of enhancing donors’ wellbeing and the positive impact it has on wider society. Levels of giving should, therefore, be included as indicators within the ONS’ National Wellbeing Project. 4.1.4 The Giving Green Paper clearly demonstrates the Government’s commitment to encouraging individual giving and philanthropy. While it is impossible to compel people to give, there is clearly a role for Government in creating a supportive legal, regulatory and fiscal environment for fundraisers and donors. 4.1.5 If commissioners are interested in using new methods of funding to achieve social outcomes, they should also consider engaging with funders who are already working in their locality or service area. Not only will grant-making foundations or individual philanthropists have knowledge and experience that might be useful, but there could also be opportunities for co-funding. Currently there are major barriers to businesses or donors investing alongside public sector funders: chief amongst these is the concern that the highly prescriptive way that services are commissioned constrains CSOs, and gives public sector funders too much control over what is done and how it is done. This can lead to mission drift for CSOs that have service contracts, and makes philanthropic donors unwilling to invest in them. If, however, funding relationships are based on payment by results for agreed outcomes, they should dictate only what is delivered, and not how it is delivered. This leaves CSOs free to operate in a way that maximises their added value, and should allow donors to have the confidence to invest alongside public sector funders. More work needs to be done to find ways of making co-funding a reality. This is an area that CAF will be looking at in the coming year. 4.1.6 There has also been proven success in leveraging private donations through government match funding programmes, for example Grassroots Grants. Government should explore the possibility of further focused match funding opportunities.

Tax relief 4.1.7 Charitable donations in the UK benefit from a generous tax relief system. Gift Aid alone brought over £1bn to civil society organisations (CSOs) in 2009–10. This income is critical for both small and large organisations striving to deliver vital services and is increasingly important in securing the resilience and sustainability of the sector in the face of wider economic difficulties and public spending cuts. However CAF estimates that, based on current donation levels, around £750 million of Gift Aid goes unclaimed every year. 4.1.8 As well as directly providing an essential source of income to CSOs through Gift Aid, the tax relief system encourages charitable giving and acts as an incentive for donors by providing personal tax relief on donations (for example, higher rate tax payers are able to claim the marginal rate of tax on Gift Aided donations; donors giving through payroll giving benefit from full income tax relief as the donation is taken from pre-tax pay). 4.1.9 There is a strong consensus amongst all interested parties (Government, CSOs and donors) that the tax relief system for charitable donations plays an important role in building a strong giving culture in the UK, however the system is now in desperate need of “maintenance” and modernisation. 4.1.10 The Gift Aid scheme, in particular, has developed considerably over the past 20 years and has been “stretched” in response to innovation and lobbying by the fundraising community (for example, Gift Aid can now be applied to goods donated to charity shops—although the process is convoluted). The system has now become excessively complex and unwieldy, placing a considerable administrative and bureaucratic burden on CSOs (and indeed HMRC), preventing organisations from gaining and using resources for maximum social impact. 8 CAF/NCVO UK Giving 2010 http://www.cafonline.org/Default.aspx?page=17922 9 CAF World Giving Index http://www.cafonline.org/pdf/WorldGivingIndex28092010Print.pdf Public Administration Committee: Evidence Ev 63

4.1.11 There has been a long-running debate on what form improvement should take. In 2008 the Government carried out an extensive consultation with the sector about the barriers to Gift Aid,10 which led to a package of measures intended to ease some of the burdens faced by charities. In 2010, HM Treasury led a Gift Aid Forum with the aim of identifying the best direction for reform. In addition to this, several research reports have highlighted the challenges and made various recommendations for change.11 4.1.12 The Government’s response to date has been measured “tweaking” of the existing system. The Government and HMRC in particular have been mindful to retain the essential principles of the schemes and to ensure that they are protected as far as possible from abuse. Although CAF would agree that the scheme is basically structurally sound and that drastic or radical reform (for example, switching to a “composite rate”) would present risks to the long-term charitable giving infrastructure, we believe that there is more that needs to be done to help giving grow and thrive in the 21st century. 4.1.13 CAF has recently taken a proposal to the Economic Secretary to the Treasury, Justine Greening MP, to develop an online, digital system for Gift Aid reclaims and donor declarations. We believe that such an online platform would dramatically reduce the administrative challenges and barriers connected to engaging donors, reclaiming funds and storing records. The proposal is designed to be cost neutral to Government.12 4.1.14 We have also provided recommendations to the Deregulation Task Force (chaired by Lord Hodgson) and to HMRC for small changes to legislation (to be included in the Finance Act 2011) which would remove the complexity and “red tape” associated with the benefit rules governing Gift Aid and payroll giving. We believe that the current stipulations severely restrict the ability of charities to engage with donors and create unnecessary bureaucracy and confusion.13 4.1.15 Share giving is currently poorly understood. CAF research suggests that only one in five adults is aware that they can donate shares to charity. Share giving is a highly tax-efficient means of donation, providing relief from Capital Gains Tax and potentially Income Tax, yet currently only around £100 million a year is donated in this way. Government should work with the fundraising community and financial advisors to promote this method of giving. 4.1.16 In addition to improving and promoting the existing charitable tax relief architecture for charitable giving, the Government should also consider the introduction of new mechanisms, such as “Lifetime Legacies”.14 Lifetime Legacies are modelled on the successful Charitable Remainder Trusts (CRTs) available to donors in the USA. In simple terms this mechanism provides the chosen charity with an irrevocable gift (offering a greater security than legacy pledges). This gift can be acknowledged by the charity during the donor’s lifetime, aiding deeper donor engagement and support. The charity is able to use the future donation as collateral and can borrow against this. This is particularly beneficial to organisations with large capital requirements and could help to address cash-flow challenges connected to services provided in a “payment-by- results” arrangement. The Lifetime Legacy also provides an income stream to the donor, as a pension-like equivalent for the remainder of their life. Evidence suggests that this giving mechanism could release as yet untapped sources of income—appealing to potential donors who are asset rich, but cash-poor (for example, people with second homes that are no longer needed) and would benefit from retaining an interest in, or income from, the asset.

4.2. Workplace Giving, Corporate Giving, CSR and CCI 4.2.1 It is important to distinguish between the role a company can play through its own philanthropic activities (corporate giving) and the role it has in encouraging and facilitating giving by employees (workplace giving). Both are important.

Workplace Giving 4.2.2 The attitude to workplace giving varies from company to company. Some feel that it is appropriate only to facilitate giving where possible, while others actively try to foster a culture of giving amongst employees. There is the potential for companies to play a key role in establishing social norms of giving amongst their employees, but this can only work where there is strong leadership and an example set by senior management. 4.2.3 Some companies have found success through enabling employees to form “giving circles”. These are small groups of individuals who might come together to find good CSOs, share knowledge, and sometimes even pool their philanthropic giving to maximise their impact. More companies should consider what they could do to encourage and enable giving circles. 4.2.4 The main practical way in which companies can show support for workplace giving is by setting up a payroll giving scheme, which allows employees to make donations from their pre-tax income. Payroll giving 10 http://www.hmrc.gov.uk/research/report-45-final.pdf 11 For example, the survey of small charities by Small Charities Coalition, 2010, the CFDG-led simplification survey 2010, Respublica’s “Digital Giving” 2010. 12 See supporting document 1 for further information on CAF’s Digital Gift Aid Proposal. 13 See supporting document 2 for further information on proposed changes to Gift Aid Benefits. 14 See supporting document 3 for full details on how Lifetime Legacies would operate in the UK. Ev 64 Public Administration Committee: Evidence

is a highly tax-effective form of giving (particularly for higher-rate taxpayers), but is underused (only 3% of donors give through payroll and this accounts for only 1% of total UK donations).15 The main problem is that Payroll Giving is only possible for employees of companies that have accredited schemes, which limits the number of people able to use it (only 4% of UK employees currently use PG, compared to around 35% in the US).16 4.2.5 The Government should look at ways of encouraging employers to set up payroll giving schemes so that more employees can use this as a way of giving. Companies themselves should also consider what they can do to encourage employees to take advantage of schemes—many companies have schemes where they will match employees’ donations through payroll giving up to a specified limit, which can be a considerable incentive. 4.2.6 The Government, together with employers, should consider the possibility of “opt-out” or “automatic enrolment” payroll giving schemes. A recent survey has suggested that many people would be in favour of such a system,17 where the default option for employees would be membership of a company’s payroll scheme, with the option to opt-out, rather than the default being non-membership with the onus on the employee to opt in. This would mirror the development of automatic enrolment for pension schemes in the US, which are to be introduced in the UK in 2012. CAF is currently planning a field experiment in partnership with the University of Bristol and businesses to test the impact of such an approach. 4.2.7 Further incentives to encourage the uptake of payroll giving should be explored. This might include employer and/or employee National Insurance relief on donations. 4.2.8 The government should look into ways that the benefits of giving shares can be promoted to employees. In particular, this should be linked to new FSA rules on the composition of bonuses in the financial sector and the new requirements on the publicly-owned banks (RBS and Lloyds) to pay no more than £2000 of any bonus in cash, and the rest in shares.

CSR/CCI 4.2.9 The Government should play a role in emphasising that there is growing evidence that CSR and CCI are not just “nice things to do”, but actually confer a competitive advantage on companies.18 4.2.10 There is a key role for organisations that can act as brokers between companies and charities. In order to link up the priorities and capabilities of businesses and their employees with the priorities and needs of charities, it is important to have someone in the middle who can “speak the language” of both and manage the relationship on an ongoing basis. This will ensure that companies are able to make the most of the skills and expertise of their employees as well as just their time. It will also mean that charities are able to identify their financial and skills needs and communicate these effectively to potential corporate partners. 4.2.11 There is currently concern that many charitable activities by companies are driven more by their own goals and priorities than by the actual needs of charities. By working with charities to communicate their needs to companies more effectively, brokers could also help to ensure that CSR and CCI activities are demand-led rather than supply-led. 4.2.12 More detail on the importance of brokerage can be found in CAF’s response to the Office for Civil Society consultation “Supporting a Stronger Civil Society.”19

4.3 Social Investment 4.3.1 Social investment describes an approach to funding CSOs that encompasses a broad range of financial tools such as loans, patient capital, equity investment and so on. It is a growth market, and represents a potentially huge opportunity for the sector to become more sustainable by diversifying its sources of funding beyond donations or contracts to provide services.

Big Society Bank 4.3.2 The Government’s main policy regarding the development of the social investment market is the proposed Big Society Bank. This is expected to launch in Q3 2011 with an initial capitalisation of over £60m of unclaimed assets. A further £200 million has been promised through the Project Merlin agreement with banks. It will undoubtedly come as a welcome injection of new money into the social investment sector that should then flow through to charities and social enterprises. However, the way that the bank is set up to operate will be absolutely crucial in ensuring that it achieves the maximum positive impact and does not generate unintended consequences. The suggestion from the Project Merlin agreement statement that the £200 million will be offered on a “commercial basis” is a cause for concern and needs further clarification. 15 CAF/NCVO UK Giving 2010. 16 www.payrollgiving.co.uk/index.php?getID=4&getTitle=Employer 17 www.thirdsector.co.uk/News/MostDiscussed/1052688/Survey-indicates-preference-opt-out-payroll-giving/ 18 Porter M & Kramer M, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility”, in Harvard Business Review, Dec 2006. 19 See supporting document 4. Public Administration Committee: Evidence Ev 65

4.3.3 The bank is currently mooted to act as a wholesale financial institution that will invest in social investment intermediaries, although there is some leeway in government announcements about whether it will also be able to act as a direct investor in CSOs. The former is the right approach to take and is not really consistent with the latter, which would be potentially damaging. By acting as a wholesaler and working through existing and new social investment intermediaries, the BSB will be able to draw on the knowledge and expertise already in the sector and strengthen the infrastructure required for sustainable growth. If BSB starts to invest directly, however, by its size and nature it will almost certainly distort the fragile social investment market in a way that could prove damaging to its long-term sustainability.

4.3.4 The Government should consider the ways in which policies in other areas (such as the Right to Challenge) will present new opportunities for social investment, and how the BSB can best be used to nurture these. There is already the example of the Social Impact Bond as one model designed to overcome the working capital problem, but there must be others too. It is crucial to identify these and to act in a joined-up way to align the BSB with the public service reform agenda.

4.3.5 One of the stated aims of the BSB is to leverage additional funding (at, it is claimed, a gearing ratio of at least 3:1) from individual social investors, grant-making foundations and commercial investors such as pension funds. Whilst it is possible to see how philanthropically motivated social investors and foundations could be attracted by new investment opportunities (as they are the primary sources of social investment at the moment anyway), there is a question mark over the extent to which commercial funds will be able to move into this space. To argue that they will be able to relies on an assumption that there will be a sufficient supply of “win-win” investment opportunities producing both reasonable financial returns and measurable social returns. However, it is not certain that this is a justified assumption. There are some who argue that there is the potential for a “new asset class” that would allow mainstream social investment (notably JP Morgan),20 but the majority of examples of win-win investments tend to be in developing countries where economic and social benefits often go hand-in-hand rather than in developed nations where the remaining social problems tend to be entrenched and difficult to solve and don’t lend themselves obviously to generating financial returns. For an organisation like the BSB, which is focused in social investment within the UK, there should be recognition that the potential to generate social returns in addition to financial returns of the order required by commercial investors may be limited, and thus that the ability to leverage non-state money might be less than supposed.

Other Measures to Encourage Social Investment:

4.3.6 If the Government wants to grow social investment from non-state sources, it should consider introducing new targeted tax incentives to encourage this, or at least remove some of the barriers that prevent social investors taking advantage of existing schemes.

4.3.7 There are already tax reliefs available through the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) scheme, but neither of these is specifically designed for social investment and as a consequence neither is well-suited for it. Community Investment Tax Relief (CITR) is a more targeted scheme that offers tax relief on investments made through Community Development Finance Institutions (CDFIs), but take-up has been poor and there is some concern that it will be impossible to justify the continuation of the scheme to the EU authorities that will be deciding this year whether to extend it beyond 2012.

4.3.8 It might be possible to adapt EIS or VCT to incentivise social investment, or it may be more appropriate to design new incentives from scratch, perhaps based on offering tax relief on investments in organisations with specific legal structures such as CICs. This brings the question of defining and quantifying the “social purpose” or “social impact” of an organisation to the fore, which is difficult, but as argued earlier, needs to be addressed.

Programme-Related Investment:

4.3.9 The new Charity Commission CC14 guidance on investment for charities is potentially a big step forward. By linking Programme-Related Investment with standard financial investment, the guidance makes clear that there is a range of different ways in which charities can use their financial assets to achieve their charitable aims, from the traditional approach of using income from standard investments to fund grants, to direct social investment in other CSOs. A number of grant-making foundations are already amongst the major social investors in the UK, so encouraging others to think more creatively about how they use their financial assets could open up a significant new pool of money for social investment. February 2011

20 JP Morgan (2010) Impact investing; An emerging asset class. Ev 66 Public Administration Committee: Evidence

Written evidence from CASE and the Ross Group Introduction CASE is an international membership organisation headquartered in Washington DC that provides professional support to advancement professionals in education (advancement covers: marketing, communication, fundraising and alumni relations). CASE Europe is based in London and includes 136 UK higher education institutions amongst its membership. The Ross Group is a network of leading development directors working in Higher Education. It works closely with CASE and is the developer of the Ross-CASE Survey of Fundraising (http://www.natcen.ac.uk/ rosscasesurvey/index.html) which is published annually and is the most comprehensive source of information about fundraising trends in UK Higher Education.

Evidence The Select Committee has asked for responses to two questions that are relevant to philanthropic fundraising by Universities: (i) methods of increasing non-statutory funding and the role Government can play in this; and (ii) how the tax system, including Gift Aid, could be changed to better support charities.

The Context Cash received from donations to HE currently exceeds £500 million per annum. These donations are provided by over 180,000 donors and university development offices have worked hard to increase this number steadily over the past five years. Universities spend around £70 million per annum in dedicated professional fundraising activities (supported, in addition, by significant amounts of time from Vice-Chancellors and other senior academics). Universities are charities and while not normally regarded as part of the voluntary sector (the main focus of the Committee’s current inquiry), there are many common interests in respect of building sustained philanthropic support. Universities lead the country in expertise in major gift fundraising and are consistently the recipients of the largest philanthropic gifts. See: http://www.coutts.com/files/million-pound- donors-report-2010.pdf. This is expertise that could be shared by other parts of the sector.

Our Response (i) Methods of increasing non-statutory funding and the role Government can play in this Philanthropic giving to HE is a voluntary act that is based on a close relationship between the donor and the institution receiving the gift. While “cause-based” charities may be able to tap into a significant market for donations without establishing a personal relationship, this is not true for universities. University Development and Alumni Relations Offices spend a great deal of time maintaining the connections with their former students, post-graduation, and ensuring that alumni understand the value that HE contributes and the difference their gifts can make. Relationship-building is particularly important in the cultivation of major gifts; voluntary, education and cultural charities have shared interests in learning from each other and working with the Government to promote and celebrate such acts of giving. The Government could encourage and support fundraising efforts across all of these charitable sectors (which frequently share both donors and fundraising staff) to create a sustained culture of philanthropy by: — Fostering a national recognition framework—potentially including a national philanthropy circle of some description, and by including philanthropy as a specific criteria for awards under the honours system—to celebrate and recognise individuals who making high-level gifts to all types of charities and those whose efforts encourage and foster the giving culture. — Continuing to develop “philanthropy ambassadors” and ensuring that they are well managed and resourced. There is a great need to build up the number of positive role models—of donors at all levels—to a wide variety of causes and from an appropriately diverse sample of the population. Universities would be happy to help in suggesting further ambassadors from their own donor population. — Promoting, directly and through industry associations such as the CBI and the BBA, the importance of corporate matched giving programmes that incentivize employee giving. The Government might consider establishing a public database of such schemes to promote their impact. — Working with the Charity Commission to lighten the regulatory and administrative burden facing individuals considering setting up their own private charitable foundations. Similarly, the Government must avoid at all costs any further regulatory or other proscriptive measures relating to how these Foundations are managed, including income distribution policies. Donors and trust administrators rightly have the flexibility at present to balance the needs of current and future beneficiaries. If the regulatory authorities discourage the setting up of Trusts by undermining the independent decision-making processes of Trustees, we discourage strategic, planned philanthropy which is key to providing charities with the ability to plan their activities ahead rather than simply depending on “appeals”. Public Administration Committee: Evidence Ev 67

Two further actions Government can take are relevant more specifically to the university sector: — Promoting regular giving and strategic philanthropy to universities as a public good to be celebrated, on the basis that universities undertake work that is central to finding solutions for key local, national and global issues, as well as providing vital under-pinning for both the UK economy and a civilised open and democratic society. It is highly regrettable that the suspension of funding for communications initiatives, implemented by the new Government on election in 2010, caught the CASE-HEFCE “Give the Gift of Knowledge” media campaign which had then recently been launched. This suspension should be lifted. — Building on the impressive increase in numbers of donors to UK higher education during the current Government matched funding programme (a 25% increase within two years) the Government should consider a follow-up programme, with a particular emphasis on encouraging first-time, lower level donors to higher education (both for alumni and the wider public).

(ii) How the tax system, including Gift Aid, could be changed to better support charities — The current structure of Gift Aid works well. As the Treasury Gift Aid Forum concluded, after extensive discussions during 2010, in particular it would be damaging if higher rate tax relief were to be abolished or subsumed into a so-called composite rate. HE is particularly successful at securing larger individual gifts and for many donors at this level, higher rate relief plays an important role in their decision-making. Higher rate tax relief is also important to individuals considering setting up private foundations, from which we believe all benefit (see above). — The recent report to the Treasury of the Gift Aid Forum Working Group supports this position (http://www.hm-treasury.gov.uk/8519.htm), but in addition, makes a number of helpful suggestions with regard to improvements to the mechanics of Gift Aid. Early implementation of the Working Groups’ recommendations would be helpful. — The Government should consider amendment to HMRC rules on charitable gifts from companies, to allow the use of corporate logos in certain circumstances, without undermining the tax-efficient nature of the gift. The equivalent US rules provide a helpful model. If the Government is serious about encouraging appropriate forms of reciprocity, we consider the “soft” marketing benefits this would bring for corporate donors to be an excellent starting point. — The charitable sector has been lobbying for several years for the introduction of legislation that would allow tax advantaged “lifetime legacies” on the US model. The Treasury and HMRC have not thus far been persuaded. Lifetime Legacies play an important role in US giving patterns and while complex could be particularly relevant to universities, many of which have the financial and risk management experience to deal with them.

One further action Government can take relating to the tax system is relevant more specifically to the university sector: — The introduction of tax-efficient savings vehicles targeted at encouraging parents to create “College Funds” that will be available to support their children should be an essential part of the financing reforms that the Government is now introducing into HE. If alumni parents are confident that their own children will be supported, they are more likely to be willing also to engage philanthropically with their alma mater. February 2011

Written evidence submitted by Lloyds Banking Group

I read with interest reports of your Committee’s inquiry into Philanthropy and Funding of the Voluntary Sector. I thought I would send you a short note to outline the role which Lloyds Banking Group is playing in supporting communities and charities across the UK. We are very supportive of the focus your Committee has placed on enhancing the culture of giving in our society.

Community Investment

Although Lloyds Banking Group is only number 12 in the FTSE Index, the independent London Benchmarking Group ranks Lloyds, by a considerable margin, as the biggest corporate investor in UK communities. We invested £76 million in 2010 from corporate and colleague donations. This included support for financial inclusion and capability, sponsorship of sports for young people and support to the Group’s charitable Foundations.

This year, Lloyds Banking Group was awarded Business in the Community’s CommunityMark, the national standard that publicly recognises excellence in community investment. Ev 68 Public Administration Committee: Evidence

Funding Grassroots Charities Much of the Group’s charitable giving is through the Lloyds TSB Foundations and Bank of Scotland Foundation—five independent charitable Foundations supported solely by the Group. In the last 25 years, more than £480 million has been invested in small, grassroots charities across the UK through the Lloyds TSB Foundations. In 2010, the Bank of Scotland Foundation was established to take forward our long term community investment in Scotland. Last year, we provided more than £29 million to the Foundations. This enabled the Foundations to support over 1,200 charities across the UK. This investment often covers charities’ core costs, such as wages for key employees. In the current economic climate, when many charities are finding it difficult to attract funding, the Foundation grants are helping many charities to survive.

Individual Charitable Donations by Colleagues Colleagues can choose their own charity to support—indeed, a number have created charities from scratch, for example to provide school buildings and materials in rural Africa. As a focus for colleague giving, the staff collectively elect a Charity of the Year which all of us can get behind. The Charity of the Year is one of the largest corporate fundraising programmes in the UK. The British Heart Foundation (BHF) was our Charity of the Year from July 2008 to December 2010. We raised £3.6 million in total for the BHF through a wide range of employee, customer and shareholder fundraising projects. The money we raised funds 15 specialist BHF Heart Nurses and 12 healthcare assistants, nurses, psychologists and health educators, who will support 14,400 patients and their families across the UK. Our new Charity of the Year is Save the Children, who are running an innovative programme to help children and parents together from deprived communities boost the child’s educational attainment and life chances. Lloyds Banking Group actively encourages charitable fundraising and volunteering among colleagues at all levels.

Matched Giving Through our Matched Giving scheme, operated by our charitable Foundations, we enable employees to maximise their contributions to the charities and causes that are important to them. Employees can claim up to £1,000 from the Foundations to match funds they raised for charity, including our Charity of the Year, or time given in volunteering. In 2010, our colleagues claimed £1.3 million in matched funding, raising £3.2 million for charities in the process.

Employee Volunteering We are committed to enabling employees to make a contribution to communities. In 2010, we launched our Day to Make a Difference volunteering programme. This enables all Lloyds Banking Group employees to spend one day a year during work time volunteering for a charity or local community project of their choice. Over 7,300 employees volunteered during 2010 in their local communities, through this programme and other volunteering initiatives.

Community Sponsorship As the Official Banking and Insurance Partner of the London 2012 Olympic and Paralympic Games, we are using the power of the London 2012 Games to inspire young people to take part in more sport through Lloyds TSB and Bank of Scotland National School Sport Week, delivered in partnership with the charity Youth Sport Trust in England and Wales and Sport Scotland in Scotland. In 2010, almost 50% of UK schools, and five million young people, took part. We also support the future stars of Team GB and Paralympics GB through our Local Heroes programme which will have provided funding to more than 1,000 emerging young athletes across Britain by 2012. Athletes receive £1,000 to help towards their training, equipment and travel costs. May 2011

Written evidence submitted by Barclays About Barclays 1. Barclays welcomes the opportunity to submit evidence to the Public Administration Select Committee inquiry on this important issue. 2. With over 300 years of history and expertise in banking, Barclays employs over 147,000 people supporting 48 million customers and clients. 3. Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking, and wealth management with an extensive international presence operating in over 50 countries. Public Administration Committee: Evidence Ev 69

Introduction—Barclays Approach to Citizenship 4. As the Committee considers the philanthropic behaviour of large business organisations, it is important to set this within the context of the wider social contribution of the private sector. 5. We describe the way in which Barclays is able to generate value in the economy and society as “Citizenship”. Our contribution to the communities in which we operate is at the very heart of our strategy as an effective financial services provider. (A copy of our recently published “Citizenship Summary” is attached.) 6. For Barclays, Citizenship means understanding the needs of our stakeholders and making decisions—in the short and long term—that will positively impact communities and the environment in which we operate. 7. Central to our vision of Citizenship is running a sound and successful bank. By doing what we do well, we will not only employ a significant number of people, and contribute a significant amount to government revenue (through direct and indirect means), but also help our customers and clients support economic growth. 8. Helping our customers and clients requires the provision of financial solutions that help them build security for their families, live better quality lives, develop and grow businesses that create wealth, jobs, and foster economic development contributing to sustainable growth for the long term. Some highlights include: — In 2010 Barclays provided £43 billion of new lending to UK households and businesses. Across the world we have lent a total of nearly £500 billion to customers and clients. We continue to use a prudent approach to lending which carefully considers our customers’ ability to repay their loans. — We supported 106,000 business start-ups in 2010 which was a 12% increase on 2009 and the largest number since 2003. — We have committed £1 billion over the next four years to improving the customer experience by delivering new technology channels, transparent products and services, and enhancing complaints management processes. 9. We recognise, though, that we must do more than just that. So we put considerable energy, investment and resource into dedicated community investment activities that build on what we do as a bank. The next section outlines our activities in this particular regard in detail. 10. While we are proud of what we have achieved so far, we recognise that there is much more to do, and we are identifying opportunities to strengthen our Citizenship approach. In particular, we are looking at ways in which we can embed and integrate social and environmental considerations into our day-to-day decision making. 11. The remainder of our comments in this submission are focused on the community investment and direct employee participation/giving aspects of our Citizenship agenda. This response outlines some of the ways, with some illustrative data, in which Barclays supports communities through charitable partnerships and giving back time, energy, and resources in order to generate real added value. We also attach the recent Barclays response to the Giving Green Paper issued by the Cabinet Office which addresses many of the issues that we expect will be considered as part of the Committee’s inquiry.

Community Investment Through Partnership Barclays Community Investment—2010 Highlights — £55.3 million—allocated in community investment; — 8,000 organisations supported across 37 countries; and — 1.5 million people reached as part of financial capability programme: — Half a million trained on financial capability. — £15 million invested over three years to help one million people. — 6,000 employees involved in delivering Barclays Money Skills. — 5,000 work experience placements for disadvantaged people; — 62,118 employees (39% of total) participated in community programmes; and — £21.4 million raised by Barclays colleagues for charities (taking total matched fundraising over the last five years to £75 million). 12. Corporate giving is a specific way in which an organisation like Barclays can demonstrate philanthropy. Increasingly, we are encouraging the use of core business skills and expertise, rather than simply donating money, to maximise our social impact. Key stakeholders in the third sector have made it clear that they believe this is how Barclays can make the biggest positive impact on society. 13. Barclays allocated £55.3 million in community investment in 2010, a figure which has remained stable throughout the crisis. We provided support for more than 8,000 organisations across 37 countries. 14. As a sector, financial services firms are one of the largest providers of vital cash donations. Employees of the sector are also amongst the most generous with their time (volunteering) and money (payroll giving). Ev 70 Public Administration Committee: Evidence

15. In 2010, we facilitated over 5,000 work experience placements for disadvantaged people and provided vocational training, interview skills, and CV workshops for many thousands more. (See below for additional Barclays-specific data.) 16. While it is important that individual companies contribute to society, it is crucial to recognise that impact and effectiveness can be improved if we work in partnership with policymakers, other companies, NGOs, and community based organisations, to ensure that our contribution is focused, scaleable, outcome oriented, and generates positive change. 17. Part of Barclays strategic focus involves working in partnership with others. This is a more effective way to achieve outcomes and Barclays has a number of established relationships with organisations such as Care International, Plan, and Citizens Advice. We develop our programmes in close consultation with external stakeholders to ensure they meet the needs of local communities.

Barclays Money Skills

18. Projects funded through Barclays community investment programme in 2010 reached over one and half million people. with financial capability training alone provided to over half a million people. Through our flagship UK community programme, Barclays Money Skills, we are investing £15 million over three years to help one million people build the skills, knowledge and confidence they need to manage their money more effectively. 19. Barclays Money Skills is delivered through partnerships with respected charities including Action for Children, the National Skills Academy for Financial Services and the National Youth Agency. Over 6,000 Barclays employees volunteer their skills and time to help deliver the programme through structured learning events and through the use of toolkits to help people in local communities across the UK. 20. A further example is the Barclays Community Finance Fund, which provides funding grants of up to £50,000 to credit unions and Community Development Finance Institutions (CDFIs). The funding is used to help these organisations up-scale and build capacity to reach more vulnerable people in communities where access to affordable credit is limited.

Project Merlin Agreements

21. Partnership with Government has also been significant. The “Merlin” agreement between the major UK banks (Barclays, HSBC, LBG, RBS, and in the context of lending, Santander) and the UK Government underlined the banks’ recognition of their responsibility to support economic recovery. The banks are working together with the Government, particularly in the areas of lending, tax, and pay, as well as broader contributions to the economy and society. We welcomed the Merlin agreement and remain fully committed to its objectives.

22. As part of the agreement, the relevant banks will “continue to support communities through institution- specific initiatives, through which they currently put over £200 million per annum (in cash or in-kind) to work in the UK. We expect, and intend, to maintain that rate of investment”.21 23. In collaboration with the other large UK banks, we will also support the establishment of the Big Society Bank (through aggregate investment of £200 million over the next two years) in the UK to act as a sustainable provider of wholesale finance to social investment. It will be crucial to ensure that the Big Society Bank has a clear set of objectives on which to deliver.

Employee participation and direct giving

24. It is important to recognise the importance of personal choice in philanthropy and voluntary giving. Many people’s chosen charities are decided upon for very personal reasons. We recognise this and do not wish to stipulate how much should be given, and by whom. However, we are able to make giving as easy as possible (as with payroll giving—see below), and to incentivise (as with matched fundraising). 25. 2010 was a record year for colleague involvement in Barclays community programmes with 62,118 individual employees participating (2009: 58,415). This represents 39% of all Barclays colleagues contributing through either volunteering, fundraising or regular giving (2009: 36%). 26. A record £21.4 million was raised for charity by Barclays colleagues through matched fundraising and payroll giving in 2010, a 9% increase on the total in 2009. This, obviously, does not include any personal donations made by Barclays employees outside of our established programmes. 27. In 2011, we are looking to further increase our colleague involvement and drive skills-based volunteering. This will enable us to leverage our skills and capabilities to contribute more effectively, and directly, to sustainable economic development in our local communities. 21 Project Merlin banks’ statement paragraph 4.2 Public Administration Committee: Evidence Ev 71

Increasing Philanthropy and Maximising Impact 28. We welcome initiatives which encourage greater philanthropy which includes Big Society initiatives from the Coalition Government. We would also welcome greater recognition for the many millions who are already volunteering and giving back through a variety of charitable activities. 29. Barclays already undertakes a number of methods to encourage, increase, and maximise philanthropy amongst employees and clients. 30. We provide employees with the means to engage in voluntary activity and charitable giving, such as by offering time off during the week to get involved in our community programmes; providing financial grants to support employee volunteering efforts; a matched fundraising scheme (raising over £75 million in the last five years) and facilitating employee giving through matched payroll deductions. 31. At Barclays Wealth Private Bank, we offer a Client Philanthropy Service to engage, educate, and support our high net worth clients in their philanthropic journey. The nature of our clients means that this is a very discreet and confidential area and our advice is based on each client’s need. It would not be appropriate to promote our clients’ philanthropic activities, but it is an important area in which we provide support and expertise. 32. Barclays Wealth recently conducted research to understand how the wealthy react in a recession and how they engage with charities and causes; the evolution of giving and the different types of philanthropists; how charitable giving habits are evolving; and what the cultural barriers and problems are that inhibit giving. This research is attached to this response, as we thought it might be of use in the Committee’s work. 33. One lesson from the Barclays Wealth research that corroborates our general view is that maximising the impact of philanthropy and community activity is about leveraging skills, resources and capital. We believe that we can make the biggest difference to society when we focus on the areas where we can share our core expertise, which is why we invest in projects that build financial inclusion and financial capability, and support enterprise. 34. It should be noted that London serves as a hub for many of the corporate leaders in the philanthropic space. Progressive companies are able to share, and do share, expertise, disseminate best practice and encourage and stimulate wider corporate involvement. There remains scope for Government and the private sector to work together further to leverage this strength and promote best practice. 35. More generally, and as we noted in our response to the Giving Green Paper, our experience is that a high proportion of charitable giving is done for private reasons and the rationale for it varies widely. One way in which Government could promote philanthropic and charitable behaviour would be through investigating further use of tax incentives and legislation that would make giving and volunteering more attractive. May 2011

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