Between 1997 and 2005, the combined income of Britain’s charities nearly doubled, from £19.8 billion to £37.9 billion, with the biggest growth coming in grants and contracts from government departments. According to the Centre for Policy Studies, state funding rose by 38 per cent in the first years of the twenty-first century while private donations rose by just seven per cent.
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This surge in government spending coincided with a politicisation of the third sector which was actively encouraged by the state apparatus from the prime minister down. Traditionally, lobbying activity could not be a charity’s ‘dominant’ activity, but could only be ‘incidental or ancillary’ to its charitable purpose. In 2002, however, a report from the Prime Minister’s Strategy Unit called for charities to increase their lobbying activity and for the Charity Commission guidelines to be made ‘less cautionary’: ‘Charities perform a valuable role in campaigning for social change. The guidelines on campaigning should be revised to encourage charities to play this role to the fullest extent.’
The Charity Commission duly revised its guidelines on campaigning two years later, allowing all non-party political campaigning in furtherance of a charity’s goals so long as this activity was not ‘the dominant method by which the organisation will pursue its apparently charitable objects’. A subsequent Cabinet Office report in 2007 called for the rules to be relaxed further still. Accepting that charities had ‘considerable latitude… for political campaigning under existing rules’, the authors expressed concern about the range of legal and regulatory restraints which ‘unjustifiably restricts political campaigning by third-sector organisations’. Stressing the right of charities ‘to undertake campaigns, regardless of any funding relationship with government’, the Cabinet Office argued that organisations whose purpose was wholly political should not be barred from charitable status: ‘Provided that the ultimate purpose remains demonstrably a charitable one, the government can see no objection, legal or other, to a charity pursuing that purpose wholly or mainly through political activities.’
With this advice ringing in its ears, the Charity Commission revised its guidelines again in 2008. Although it fell short of allowing charitable status to those whose activities were entirely political, it relaxed the guidelines to allow charitable status to those for whom political campaigning was the ‘dominant’ activity. The only restrictions fell on charities for whom political campaigning was ‘the continuing and sole activity’ as well as those who were party political. So long as a charity can convince the commission that its lobbying will ‘achieve its charitable purpose’, it can direct all of its resources towards legislative targets, though only ‘for a period’ (the duration of which has never been defined). This is essentially the opposite of US law, where political campaigning must be no more than an ‘insubstantial’ part of a charity’s work. In the UK, an insubstantial amount of non-lobbying activity is enough to secure charitable status.
“By 2010, statutory funding of the voluntary sector had risen by 128 per cent within a decade”
As the rules on political lobbying were relaxed, statutory funding to charities continued to rise. By 2010, statutory funding of the voluntary sector had risen by 128 per cent in the space of a decade, with more than a fifth of the nation’s 171,000 charities choosing to take the money. Some 27,000 charities became dependent on the state for more than 75 per cent of their income, and more than a third of the sector’s total income came from the state - some £12.8 billion in 2007/08, according to the NCVO. When contributions from the National Lottery are taken into account, charities received more money from government in 2010 than they did from voluntary donations.
The voluntary sector’s increasing reliance on government largesse has provoked much discussion. Critics have accused governments of using statutory funding to silence belligerent charities and of politicising good causes (1). They have accused politicians of distorting civil society and debasing the concept of philanthropy. ‘A charity that relies in the main part on taxes’, wrote the blogger Guido Fawkes, ‘is no more a charity than a prostitute is your girlfriend’. Others have complained that NGOs squander government grants on vanity projects that benefit neither the sick nor the poor.
Some of these concerns are shared by those who work in the sector. The National Council of Voluntary Organisations was worried as early as 2001 that ‘the voluntary sector may be perceived as little more than an agent of the state’. More recently, the third sector’s Independence Panel warned of the ‘danger that parts of the voluntary sector which deliver public services could in effect become not-for-profit businesses, virtually interchangeable with the private sector’.
Those who have debated the pros and cons of charities taking taxpayers’ money have traditionally focused on whether the voluntary sector is being bribed into silence. The possibility that state funding might actively encourage charities to lobby on the government’s behalf seems not to have occurred to commentators until quite recently. Civitas (as it is now known) published two critiques of the state’s relationship with the third sector in the 1990s without mentioning lobbying. By 2007, however, the issue had become unavoidable and Nick Seddon devoted a chapter of his book, Who Cares?, to the problem of politicisation.
Seddon writes: ‘There is something unsatisfactory about taxpayers’ money being used to fund charities that are campaigning for things that we may disagree with: the blurring is the issue. If it’s a state department, then it should be acknowledged as such, and funded by the taxpayer in the normal way. But if it’s really a quango masquerading as a charity, then it’s disingenuous to present it as part of civil society.’
Among the criticisms Seddon levelled at the Blair-era system of financial patronage were that politically incorrect causes were being left out of the loop; that charities were vulnerable to changes of government; that the third sector was becoming homogenous in outlook, and that frontline services were being sacrificed to make way for lobbying and advocacy. He noted the tendency of the Labour government to commission like-minded charities ‘to write “independent” reports that validate other “independent” reports commissioned by the government, so that a body of material can be built up to support the government’s projected policy direction’.
“Critics have accused governments of using funding to silence belligerent charities and of politicising good causes”
A different, but related, issue was raised in a Conservative Party research document, Government Lobbying Government (2008), which identified a ‘growing tendency by central public-sector agencies to hire public-affairs companies to attempt to influence and lobby central government. The taxpayer is effectively paying for the government to lobby the government itself.’
Interestingly, Government Lobbying Government makes an explicit reference to public-choice theory: ‘Such lobbying creates a bias within government for more public expenditure and more regulation. This is “public choice” theory in action – state bureaucracies spending money to justify their own existence.’
A system in which politicians fund their supporters who, in turn, expand their bureaucracies, comfortably fits the image of politics presented by public-choice theorists. The political elite has an incentive to transmit its message to the public via third parties because voters regard almost anyone as being more trustworthy than politicians. If the government’s message is relayed by ‘independent’ and ‘objective’ citizen’s groups, so much the better.
Enter the charities. A 2010 survey found that 75 per cent of the public believes that most charities are ‘trustworthy and act in the public interest’. A different survey conducted a year earlier found that only 44 per cent trusted civil servants and just 13 per cent trusted politicians. Machiavellian though it may be, politicians have a motive for buying favour with respected organisations in the hope of using them as their mouthpieces.
Christopher Snowdon is a research fellow at the Institute of Economic Affairs. Read his blog, Velvet Glove, Iron Fist.
The above is an edited extract from his most recent publication, Sock Puppets: How the Government Lobbies Itself and Why, published by the Institute of Economic Affairs. It is available to download here.
(1) For example, see Whelan, R. (ed.), Involuntary Action, London: IEA Health and Welfare Unit, 1999
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