Charity FDs stage early election skirmish

It was hardly the shot heard around the world, but in its own quiet way the Charity Finance Directors Group (CFDG) kicked off the profession’s election hustings with a “Question Time” election debate in Westminster between charities minister Angela Smith and her shadows Jenny Willott (Lib Dem) and Nick Hurd (Con). The CFDG website includes a podcast and transcript of the full debate.

Each of the politicians brought first hand charity experience and credibility to the table and spoke with equal sincerity about the issues facing the wider sector and the 50 or so FDs in the Parliamentary meeting room at Portcullis House. The consensus was such that only the division bells disrupted the political harmony, and even then they agreed a three-way “pair” with their whips that allowed them to stay behind and continue their charitable deliberations.

Although Hurd professed optimism around the possibilities of social investment as a way to channel capital into public services, the politicians admitted that the outlook was bleak for charities on many fronts:

• Measures to rein back public debt would filter through to the charity sector, which has taken on more and more contract work on behalf of public sector bodies. According to Hurd, the state is ultimately responsible for around 40% of charity funding through grants and local authority contracts. As Willett explained, this makes charities much more vulnerable to cuts during recession. “If you’re a local authority, it’s a lot easier to cut funds that go to the third sector than to take on unions and cut your own staff,” she said.
   
• VAT treatments: Charities are eligible for exemption on their profits from their primary charitable activities, but in the increasingly complex commercial world in which they operate, non-primary transactions such as sponsorship payments, land development gains and sales of secondary goods and services are not exempt. Mathiew Mori of the Charity Tax Group asked the politicians what their parties would do to implement provisions in the EU VAT directive to provide relief where one charity provided back office services to others. But even in this relatively uncontroversial area, the politicians were powerless to act independently of their Treasury seniors. While keen to help charities, Smith commented: “In the view of the Treasury there are very few simple measures.” Willott sympathised with her Labour counterpart. “One of the reasons we’re in a mess is because there have been changes that haven’t been thought through... If you took one element like shared services and tried to resovle the VAT issue on that, it might cause problems elsewhere that haven’t been forseen. The system is far too complex for anyone who’s not Treasury minister to understand.”
   
• Gift Aid bureaucracy – what would the parties do to reduce admin and to increase the funds that reach charities?  Smith, the incumbent minister, said that when elections come around, “Everybody wants to make promises and be helpful.” Consensus has emerged around a proposal for a higher rate of relief, but what any shift would create winners and losers. Smith said “significant work” is being done around the subject and expected to see a report ahead of the Budget. Willott said the Lib Dem manifesto would include a commitment to introduce a simpler scheme within the first year, based around a higher “composite” rate for Gift Aid. The Tory agenda was around making it easier to run third sector organisations and an overhaul of Gift Aid admin processes was overdue, Hurd said. But when it comes to increasing yields, “I don’t think that’s going anywhere. The Treasury isn’t letting this go anywhere because they can’t afford it,” he said.

Because of the pressure on their time, the politicians had to make their exit before BBC social affairs correspondent, CDFG trustee and debate chair Kim Catcheside could grill them more extensively on VAT. How unlike politicians to avoid the difficult questions... Among the other topics left behind was a discussion about the relationship between IFRS and Charity SORPS – some of us would have paid good money to see politicians grapple with that hot potato, but the issue will have to wait for another day.

The CFDG election debate was a well mannered and informative affair that was strangely free of the knock ‘em, sock ‘em invective one usually gets in British political debate. Perhaps with the prospect of a coalition government ahead of them, the charity sector’s political representatives were exercising their consensual muscles and showing the way ahead for their more high profile collegues.