Do we really need so many charities?

I’ve written several times on the madness of the system regulating charities in the UK.

We have 160,000 odd of them. Some are good (in that their net effect is positive for the general population). Some are bad (being frauds or ego trips). Most are middling. But they aren’t particularly well watched (the Charity Commission can’t possibly watch them all at once) and they endlessly duplicate each other’s aims.

They also come with huge opportunity cost: charities have tax-free status, but they can also reclaim income tax paid on donations given to them (via Gift Aid). That tax is reclaimed directly from the Treasury, and then can’t be used for anything else (schools, hospitals and the like).

Claim £10 of Gift Aid for a charity and that’s £10 that isn’t going to be spent on getting a new MRI machine for someone’s local hospital, on paying public sector salaries and pensions, on building HS2 or on cutting your child’s primary school class size below 30 kids.

That would be fine if we could be sure that the charities spent the money at least as well as the government (not, let’s face it, a particularly tough target). But there is precious little evidence that they do.

All this was thrown into sharp relief by a letter to The Times this week. Pat and Sue Berry from Lewes, East Sussex want to leave some of their money to charity. But, they say, there are so many cancer charities, so many wildlife and animal charities, so many local hospitals and other, no doubt, worthy groups that it is hard to differentiate between them.

It is confusing, of course, but, say the Berrys quite rightly, it must surely also lead to “huge inefficiencies and overhead costs”. For this the Berrys blame funding cuts. Is it these, they ask, that have weakened the Charity Commission,  and allowed “the number of overlapping charities with identical or near identical objectives to grow?”

They are blaming the wrong thing. The truth is that our charitable system is a chaotic mess. It allows too many people to do too many overlapping things (there is no sense in the registration process that duplication is a bad thing)*, and it allows these things to be done via a huge transfer of cash from the general taxpayer to special interest groups.

If I had my way (sometimes it happens…), the number of charities able to live off Gift Aid would be cut from 160,000 to more like 100 with a strict ‘one in, one out’ policy alongside a no-overlap policy.

Each of those 100 would be constantly evaluated to be sure that their work was better done outside the public sector than inside the public sector (ie, that the opportunity cost of their existence was lower than their cost to the taxpayer).

And everyone else with a yen to finance or to be seen to finance good causes? They could continue to raise money as and when they like, just not at the expense of the tax revenues that are supposed to pay for our core services.

This would all be cheaper, fairer, less chaotic and it would also make it much easier for the likes of the Berrys to feel secure in being generous with their wills.

* I count eight donkey charities and six red squirrel charities in the UK. There are another 300 devoted to the welfare of domestic pets and another 1,000 plus to animal rescue centres. You get the picture.

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  • Boris MacDonut

    And all the posh kids schools. Charities. Pah!

  • Richie

    I don’t understand why competition in charities is a bad thing. Surely letting people have a choice of which charity to give to is better than a single charity having a monopoly.

  • Jack Kilms

    I say so what. There are millions of businesses in the UK, why not have 100 really big ones? (We tried something similiar.)

    I say (for example) do you give your money to a huge UN charity where the money is wasted on Toyota Land Cruisers, big salaries, long holidays, fat pensions and executives staying in the Four Seasons. OR do you contribute to a small outfit having a heart to address specific needs, driving old VWs and living by faith. The latter is consistently more efficient and if they dont work, they fold,

  • WhyNot

    and lets not forget that duplication has a huge impact on the eventual recipients of limited donated funds

    By the time the admin has been accounted multiple times for in each charity and lets not forget the CEO (lifestyle – Sir Stephen Bubb etc.) salaries involved which all go to drain the available funds for distribution

    Here is an article along the lines of this one

    http://www.voxspeak.co.uk/post/2013/12/15/Charity-Gift-Aid-Robbing-Peter-To-Pay-Paul.aspx

  • Arkwright

    What a depressing article.

    For sure most charities are “inefficient” managerially and financially. Is efficiency really the key point of charities?

    A charity I work with was started by and is staffed entirely by volunteers, taking not a penny of income from the charity themselves, including full-time staff, with families and small children to support (and was so before they got charitable status). Nobody outside the organisation knows that they are unpaid. I have seen the difference they make to the lives of others while living in poverty themselves in order to do that, when some of them have left good jobs to do it. Personally, I don’t feel inclined to stand in smug judgement on the efforts and sacrifices of these people, despite the undoubted inefficiencies and weaknesses of the young charity.

    Perhaps, Merryn, you should get stuck into one of these inefficient charities yourself and see what you can contribute in terms of time and expertise, you might write a different article in a year’s time.

  • Merryn

    @Awkwright that most of the people who work for or volunteer at charities have excellent intentions is not the issue here. We can assume they do. We can also assume that they work to some effect. The point is that there is opportunity cost. There are choices. For every charity the taxpayer supports (and all charities that use gift aid are taxpayer supported) something else isn’t done. Do we need the 6 squirrel charities more than we need new cancer drugs? The 8 donkey charities more than teaching assistants? All choices.. choices I suspect we can make a lot better than we do.

    • Arkwright

      @Merryn: “choices I suspect we can make a lot better than we do.” Who, exactly, is “we”?

      What you propose would inevitably become a politician-dominated form of centralisation with a few approved institution worthies making value-judgements about what the other 65 million “we” should support, rather than the truly democratic, inefficient mess (squirrels, donkeys and all) we currently have. God help us – let’s stick with the latter.

      Regarding opportunity cost, what I have seen is that large companies often wish to give to charities (“we” would doubtless disagree with their priorities for giving) but can only start to do that when charitable status is gained. How does the “opportunity cost” equation pan out there? (Don’t tell me – they would still give to anonymous large institutions provding teaching assistants,,,,)

      Also regarding opportunity cost, what I have seen is that small, inefficient charities sometimes come up with extraordinary innovations that are copied (even commissioned copies) by NGOs, too obese and sluggish to innovate themselves.

  • dave21kj

    Interesting debate. Is it best to have the state mug us all and decide where the money goes, or is it best to have charities and the people decide where the money goes? If the latter, what would people give? The answer is less than current e.g. I am taxed at marginal rate of 52% and that is before all the other taxes are take into account.
    Bottom-line is that tax distorts. A seller wants to sell for £10, the buyer wants to buy for £10. Buyer needs to earn £25 in order for the transaction to take place. The transaction does not take place. The economy stagnates and we need more tax and welfare and charities!

  • CityFarmer

    Does the 160,000 include the charity whose sole purpose appears to be flying Mr G Brown and his wife ( all expenses paid ) all over the world, and the educational one setup by Teflon Tony to provide busaries for the tertiary education of children with parents who are former PMs called Tony.

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