Charity shops: a bad deal for charities, a worse deal for taxpayers

Despite all their advantages – discounted business rates, free labour, free stock – charity shops raise very little money for the causes they are supposed to support. But still cost taxpayers up to £1.6bn.

I've written several times about the problems with the way in which the taxpayer finances the charitable sector via the state (all in it costs us a minimum of £6.5bn a year in lost tax revenue). But this week brought one of the most maddening illustrations of the way all this works yet.

The True and Fair Foundation (which lobbies for more efficiency in the charitable sector and is much loathed by much of the sector) has been having a look at the finances of the charity shops that line pretty much every inch of our high streets.

There are now around 10,500. They get 80% off business rates. They pay nothing for their stock (it is mostly donated). And they pay very few of their staff (most workers are volunteers). They should be making a killing. But here's the shocking thing: they aren't. Despite all their advantages, a very large proportion of them bring in very little money for the charities they are supposed to support.

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Overall, the shops made total (tax-free) profits of around £290m last year. But they got anything from £273m to £1.6bn worth of tax breaks alone the way. How's that for a lousy deal for taxpayers?

The shops keep a lot of volunteers busy and engaged with communities (which is nice); they clearly help with the recycling of used goods inside our economy (also nice); and they divert some cash from consumers and from HMRC to various charities (something this is nice, sometimes it is not).

But that all comes at a cost one that, from this report at least, looks to be rather too high.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.