Digital, Culture, Media and Sport Committee
Oral evidence: The work of the Charity Commission, HC 577
Wednesday 29 November 2017
Ordered by the House of Commons to be published on 29 November 2017.
Watch the meeting
Members present: Damian Collins (Chair); Julie Elliott; Paul Farrelly; Simon Hart; Julian Knight; Ian C. Lucas; Christian Matheson; Brendan O’Hara; Jo Stevens; Giles Watling.
Questions 1 - 56
Witnesses
I: William Shawcross, Chair, and Helen Stephenson CBE, Chief Executive, Charity Commission for England and Wales
Written evidence from witnesses:
– [Add names of witnesses and hyperlink to submissions]
William Shawcross and Helen Stephenson.
Q1 Chair: Good morning, William Shawcross and Helen Stephenson. Welcome to the Select Committee this morning. This is the first time that we have had the opportunity to question the Charity Commission since the DCMS Department took on responsibility for charities and civil society. I am very pleased we had the chance to do that before you, Mr Shawcross, stand down as Chair. We have, in a few weeks’ time, the opportunity to conduct a pre-appointment hearing with your successor. Bernard Jenkin last night asked me to pass on his thanks for the work of the Charity Commission with his Committee and thanks for the work you have done as the Chair of the Charity Commission and I would certainly like to echo those sentiments as well.
William Shawcross: Thank you, Mr Chairman. It is a great pleasure for us to be here. We had a wonderful relationship with Bernard Jenkin and his Committee. It had its highs and lows, but it was excellent and it was very, very helpful. I am sure our relationship with your Committee will be equally helpful to the Commission. I am sorry that I only have a few weeks left to enjoy it, as my successor will also. Helen, who has only recently joined the Commission, you will see a lot of her and she is a huge asset to us.
Q2 Chair: Thank you. The National Audit Office has published its report on the Charity Commission this morning, which is very positive about the work that has been done over the last three years in taking the Commission forward. As part of that, that work has been supported by the additional £9 million that the Commission received for a three-year period to support the change programme. That money will stop shortly. Therefore, Mr Shawcross, do you feel that unless additional funding can be secured for the Charity Commission that this is going to give your successor difficult decisions to make in terms of the allocation of the resources that the Commission has?
William Shawcross: The short answer to that is yes. Before I arrived at the end of 2012, our budget was cut in 2010 from £40 million to £20 million by the coalition at the time of all the austerity cuts. We have been stuck at £20 million, £21 million ever since, apart from this absolutely invaluable £8 million to £9 million that the Chancellor gave us in 2014 to modernise our processes and our systems, which has been absolutely crucial to us being able to carry out a transformation programme basically of our business workings. That is now completed.
The money is all spent, as you said, and it is making a huge difference to the way in which we can respond to all the inquiries and the needs of charities. For example, we can now register a charity within three days automatically instead of many weeks. That is the most obvious one. The demands, astonishingly, for our services go up all the time. I think we have registered about 27,000 new charities since I joined five years ago. We get about 8,000 applications a year, of which we approve 5,000 that the organisation deems to be charitable under law.
The Commission is a hugely important part of what is a very important sector. I did not realise when I arrived that there were 175,000 charities in this country with a total income now of about £74 billion a year. That is twice the NHS roughly and half the defence budget, so it is a huge part of British society and I think an incredibly valuable part of British society. It has been a great pleasure and an honour for me to chair this Commission for the last five years, to try to help the charities sector improve itself and meet its proper purposes.
Q3 Chair: You have performed a very helpful service for me as Chair, because by listing the number of charities there are registered with you, it reminds me that I forgot to ask the members of the Committee to declare their interests for the various charities that they are themselves involved with. If you will bear with us for a moment, we will do that.
William Shawcross: Of course.
Chair: I will start off, just to declare that I am a director of Step Short in Folkestone, which is a First World War Centenary charity, and a trustee of the Shepway Sports Trust.
Jo Stevens: I am a patron of CADR Cymru, which is for dementia sufferers.
Simon Hart: You got me thinking. I am trying to remember which they were. I was a trustee of the Countryside Alliance Foundation. I think that is the only trusteeship I currently have.
Giles Watling: I am the vice-chairman and a trustee of the Royal Theatrical Fund and patron of Inspire.
Ian C. Lucas: I am a patron of Dynamic and The Venture, which are two charities in Wrexham.
Chair: Any other declarations?
Christian Matheson: I am a trustee of a charity in Chester to inaugurate a statue in memory of the Cheshire Regiment.
Q4 Chair: Very good, thank you all very much. As you only cover England and Wales, Brendan O’Hara does not need to make a declaration as a Scottish MP.
Mr Shawcross, you set out the breadth of responsibility and the growing responsibility you have because of the sheer number of new charities that register, as well as maintaining the oversight of the ones that are already in existence. What sort of resources does the Charity Commission need to be an effective regulator for the charitable sector?
William Shawcross: That is a very hard question to answer because we are demand-led. The number of requests for registration has gone up significantly in the last five years. We never had so many before, so that is something that was unpredictable and unpredicted. Our numbers of cases have gone up. The year before I joined in 2011 to 2012, we had 12 inquiries. Last year we had 187 inquiries. That is because we have become, under the new board that I created, a much more robust regulator, I hope.
I think the real purpose or one of the statutory purposes of the Commission is to maintain and enhance public confidence in the charities sector. I and my new board decided that the only way we could do that with our reduced resources that we inherited was to be robust in the most obvious places where that was needed. We made three priorities: protecting vulnerable beneficiaries, countering fraud in charities and protecting charities from extremist abuse. Those have been our three priorities. I hope we have carried out those priorities adequately.
As to the amount of money that we need, perhaps Helen should take that up, because she is going to be here talking to you about it in years to come.
Helen Stephenson: Some of the things that we have implemented, first of all, we now have a cost model, so we understand how much it costs to deal with the various types of interactions with the Commission. We also have a far better understanding of the volumes that come into the organisation and indeed how long each case might take. We will use that to predict the amount of funding that we need to be a robust regulator, but as William says, we are demand-led and you probably could treble the amount of staff that I have in order to deal with the range of issues that there are in the sector. What we do need to do is to prioritise the areas that we will be acting in and ensure that we have the resources to respond to the issues that we will consider a medium or high risk to the sector.
Q5 Chair: Can I just ask, on the risk-based approach that you have taken, how do you define what a risky charity is? You have outlined some of the areas of concern, but how do you determine that a charity is risky enough to warrant special attention?
Helen Stephenson: In the four areas that William described, the fourth is where there is an issue that could really cause significant undermining of public trust, so something that is such a seismic failure of governance that it would cause significant undermining of public trust. Those four areas, if you like, are our risk pillars and we assess charities on the basis of that. It does not mean to say we will respond to everything there, but it just enables my caseworkers to have a decision support tool.
We then have a casework risk assessment tool too, which allows us to triage the situation that comes in to us, the issue that comes in to us, to again say whether or not that will fall within one of our risk pillars, because we do get an awful lot of information and correspondence with the Commission. I was amazed when I joined just four months ago that we have over 100,000 pieces of communication with us a year. That can range from somebody feeling upset with one of the trustees in their organisation through to a serious issue of whistleblowing. My caseworkers need to calibrate that risk, if you like, against those four risk pillars and prioritise it on that basis. There will be some issues that come in to us or we are made aware of that we will not respond to because we have to absolutely focus on the more serious issues.
Q6 Chair: But are you reliant on people coming forward with information to you and then assessing which cases you think warrant investigation?
Helen Stephenson: No. That is one aspect of what we do, but what I am very pleased with is the fact we have developed a risk assessment unit. Part of what that unit will do is to triage the information that comes in to us, but it will also use the data that we have to understand whether we are seeing themes or issues coming in to the organisation that we might need to respond to through our monitoring or our inquiry work. I think an example of this would be we were seeing a number of cyber frauds coming in, so charities reporting as a serious incident the fact they had been subject to cybercrime. We were able to do a more systemic investigation into that across our data and we were able to issue a regulatory alert to charities just to be aware and to be alert to the potential of cyber fraud. That would be just one example of how we proactively used our data to address an issue that the sector was facing.
Q7 Chair: If it was a matter of people being concerned about the misallocation of funds or poor management by the directors of the charities or poor oversight by the trustees, with something like that, do you have the ability to assess that externally or are you reliant on effectively whistleblowers saying, “We think there is a problem here”?
Helen Stephenson: This is why we have our annual return. Every charity on our register submits to us a series of information each year, which enables us to interrogate that and to look at any particular issues in charities in real time. Yes, we are able to assess that on the data that we hold, not just relying on people coming in to us. But if we were given an example of fraud, then obviously we would respond to that seriously and that would be high on my risk register.
Q8 Chair: Obviously the issue of Kids Company was well documented, but would you feel confident that if a charity was struggling in a way that that one was that you would have the ability to recognise there was a problem from the data that you hold or would you still be reliant on someone within the organisation coming forward and saying, “We think you need to look at this”?
Helen Stephenson: It is always a hostage to fortune, isn’t it, when you are new in a role and you say, “Yes, I am absolutely confident”? But yes, I am certain that we, as an organisation, have moved on significantly since then. We have responded in a number of ways to the issues that that charity in particular faced and we have strengthened in particular our guidance to trustees and to auditors and advisers to charities about the need to give us that information.
We have also strengthened the policy on reserves. I will never say never, but I am confident the organisation is better placed to spot a charity with significant issues like that. Indeed, we carried out a series of monitoring and inspection visits on the back of that with charities we felt could be at risk of financial distress and we did some proactive monitoring and published a report on the 97 charities in response to that. Certainly we have strengthened our processes since then.
Q9 Chair: Just before bringing in some of my colleagues, earlier on you said that the work of the Charity Commission in many ways is demand-led by the charities themselves. When considering future funding, therefore do you feel that the charities themselves should be making more of a contribution towards the services that they themselves rely on from the Charity Commission?
William Shawcross: That is a really important core question. The simple answer to your question is, in my view, yes. The previous Chancellor, Mr Osborne, stressed that we should be consulting with the sector as to how it could relieve the burden of paying for the Commission from the taxpayer. I think that that is, in the medium and long term, the right thing to do, at least partially. We had hoped to go to consultation with the sector earlier just before the referendum happened, and that was stopped because of the referendum, and then earlier this year we were about to go to consult with the sector on partial sector funding and then the election happened, so we were unable to do that, but I hope that my successor can start very soon. We need to get permission from the Government and to inform the sector obviously that we will do that.
My initial thought is that in the best of all possible worlds, we would like to try to get eventually—well, not eventually, but in the medium term—the sector to contribute £7 million towards our budget. We would be very, very careful not to impose this burden on tiny charities. The vast majority of the 170,000 have an income of less £20,000 a year and we would not put any charging system on for them. It would start with only the very richest charities to begin with. But in answer to your question, yes, I think in the end the only way that the charities regulator can be funded is by the charities themselves. Most sectors do fund their own regulators. There is nothing very unusual about that, but it is not going to happen while I am here, I am afraid.
Q10 Chair: In your view, where would the threshold be in terms of income for a charity whereby they should be contributing?
Helen Stephenson: If I could add a few points, we are thinking less than 1%, or about 1%, of the charities on our register, so the income threshold will be quite high. We obviously want to consult on that and get the views of the sector.
Q11 Chair: Mr Shawcross said that the charities with an income of under £20,000 would not be required to make a contribution, but do you feel that charities over £20,000 a year would be—
William Shawcross: No, it would be much higher than that, much higher.
Helen Stephenson: No, it would be much higher than that. It is charities with significant income—the top 1% to 2% of charities on our register.
Q12 Chair: Give us an idea. Would that be charities with income of over £1 million a year or over £100,000 a year?
Helen Stephenson: It is certainly in the millions, I think. They are significant charities. But obviously from my perspective coming into the organisation, we have really made progress in terms of being an effective regulator and an organisation—and I think the NAO recognise that in the report—who will be there to call it out when it is wrong and we will respond robustly. However, there are over 700,000 trustees, and you demonstrated today your own involvement in the sector, and mainly they are volunteers, trying to do a really decent job to run these organisations. What I want to do is to do more to help them get it right so that we do not end up with the issues further down the line.
What I want to do is to be able to ask the sector to help me to be able to work more directly with trustees to help them get it right, rather than having to respond when it goes wrong. I think that is where we could really develop as a regulator, so we would be both the robust regulator dealing with the issues that we face, but also helping those 700,000 trustees who are doing a great job—and I think are pretty much a national asset or treasure—to get it right and to run their charities effectively and have a real impact for society. That is what I want to be able to talk to the sector about in being able to fund us to do that work.
William Shawcross: I think that is a crucial point that one should always remember. Trustees are nearly always voluntary and unpaid and they do an extraordinary amount of work to keep this part of our society going. It is a crucial part of our society. It sort of softens Government, if you like, and the scale of philanthropy that we have in Britain is literally unique. Certainly there is nowhere else in Europe that has the same sort of philanthropic tradition that we have had since the Statute of Elizabeth in 1601. It is something that we are very conscious we want to preserve and trustees are crucial to that.
Q13 Chair: I suppose with this consultation, if and when it comes, there is the view of the charities themselves on those arrangements, but also there will be the views of the people that give money to those charities. If someone was giving money to a major charity, they might say, “Why is my donation also helping to effectively subsidise the rest of the charitable sector and therefore charities I have not given money to?”
William Shawcross: That is a very important, frequently asked question and you are quite right. I believe that the amount that we would require from major charities would be so insignificant that it would not really be a problem. But that is something of course that they and we would have to answer. My answer is that to help the charities sector, you need an effective regulator and public spending is being cut everywhere.
Helen Stephenson: Eighty-eight per cent. of the public say that the Charity Commission is important or very important, so they value having a good regulator. I personally think the public, if asked, would back a very small percentage of their donation being used to fund an effective regulator, so that they know that they can give safely and donate their time and their money to charitable causes safely.
Q14 Simon Hart: You mentioned that 175,000 charities submit an annual report to you. Do you really have the resources to do 500 a day to check that there is nothing in there that might raise a concern?
William Shawcross: No, of course we do not.
Q15 Simon Hart: Is that a sensible practice to be engaged in?
Helen Stephenson: There are two purposes for the data that is submitted to us. First of all, we do use it. We use it both to investigate individual charities but also to search themes and to be able to look at issues and cross-cutting issues that arise in the sector. We do use it and we use it regularly in our interventions, but also the public register is the most important tool I think that we have in terms of the country being able to understand about the charities they gift and support. The data on our register was viewed 13 million times in the last year, so the public, other bits of Government, other organisations use this data. If you like, it is transparency and accountability data.
Q16 Simon Hart: But in terms of you as a regulator, it is there as a reference point, but you do not routinely inspect each and every one of the submissions that are made to you?
William Shawcross: Not each and every one.
Helen Stephenson: Not each and every one, no.
William Shawcross: We could not.
Q17 Simon Hart: I just wanted to establish that. There is no suggestion that just because you were sent 175,000 returns that somehow you were able to interpret—
William Shawcross: No, no, of course not.
Q18 Simon Hart: Park that for the time being. On the question of regulation, on which you quite reasonably argue that you have made significant progress, have you struck off any charities in the last couple of years?
Helen Stephenson: We removed 4,500 charities from the register last year.
Q19 Simon Hart: For what sort of offence?
Helen Stephenson: That would be a whole range of reasons. Some of them would be just that the charity had ceased to operate, but we do have the powers to wind up charities and we have used that power.
Q20 Simon Hart: Just getting a little bit more into it, how many charities have you, as a regulator, decided do not meet the criteria that you set and you have therefore ordered their cessation?
Helen Stephenson: Removing them. I do not have that data with me, but I can write and let you have that, absolutely.
Q21 Simon Hart: It would be quite interesting. Likewise, apart from that, what sort of sanctions do you have for offenders?
William Shawcross: We do not have as much as we would like.
Q22 Simon Hart: What would you like?
William Shawcross: I was going to carry on to say our situation has been improved greatly by the passage of the Charities Bill in 2016. We now have new powers of warning, disqualification and winding up charities. That has been a huge new regulatory tool for us, for which we are very grateful to Parliament. I think we have used those new powers 70 times, haven’t we, so far?
Helen Stephenson: Yes.
William Shawcross: We do not want to use them in a draconian manner, but they help us to be much more effective against charities that abuse their positions. I want to stress that the number of charities who abuse their positions or their charitable status is pretty small, so far as we know, but they do create a lack of confidence in the charities sector. That is why we are determined to be very vigilant against them.
Q23 Simon Hart: That information presumably is available. You are going to write to us later on?
Helen Stephenson: Yes. We have used all of our powers; over 1,000 times in the last year.
Q24 Simon Hart: The last point, if the Chairman will allow me, I think—and it would not be unreasonable—as a general rule, if you get a complaint about a charity, in the first instance do you always refer it to the trustees to deal with or to at least make a comment? What is the process that you would normally follow?
Helen Stephenson: It depends on the issue that is being raised with us. If it is an issue about trustees disagreeing with each other, then there is not an issue for us to be involved with there. We cannot intervene in the running of the charity. However, if it is somebody whistleblowing about the charity, then we would obviously want to investigate that more fully. Yes, we would refer back to the trustees as we move something into a case or into an investigation or even into an inquiry, depending on the seriousness of the issue.
Q25 Brendan O'Hara: The National Audit Office report identified that sustainable long-term funding is absolutely crucial to your future. As I understand it, there is no agreed position yet between the Commission and the sector and Government about the level of funding and the length of time that funding should go on for. Could I ask you, have you calculated a figure that you need to be how you described yourself, that effective regulator that you want to be?
William Shawcross: We have not calculated an exact final total figure and the NAO report itself says that that is very, very hard to do. What I said earlier was that we would like to raise certain sums from the sector, because I recognise that public funding is not going to increase quickly. The state of the country is one where public funding is likely to diminish all over. I do not want to be NIMBY-ish about it and I am keen to encourage the sector to help us. I think that that will happen. I get different responses from different charities. Obviously some say, “No way” and others say, “Yes, we recognise that this is a sensible and important way forward”. But I cannot give you an exact figure. Do you have a more exact proposal?
Helen Stephenson: I can set out a range of services that I would like to provide for the sector. The NAO report says it is in the region of about £7 million. Those services, for instance, I have an advice line for trustees at the moment that is open only two hours a day in the middle of the day. I would love to be able to open that more extensively so that individual trustees can call us and ask for help and advice.
I went recently to my Liverpool office and sat with one of my caseworkers on the phones and it was literally listening to people who wanted to file their annual return or just wanted a bit of advice about how they uploaded that on to the system. We are able to give that, but just for such a short window in the day. I do want to set out a range of services and opportunities that I think it is fair to ask the sector to help fund.
Q26 Brendan O'Hara: If you include the £7 million from the sector and other funding that you get, what would be your ballpark figure for what you would need to be that effective regulator, including public money and from the sector?
Helen Stephenson: I think if we were in a position to be able to raise £7 million to help fund our enablement work, we would be able to focus our core grant, which currently stands at £22 million, on our compliance and regulatory and registration work. That is my initial thought. Obviously I need to clear that with my board and we would need to discuss it with officials in DCMS and the Treasury, but that is my own view on the amount that we would need.
William Shawcross: Somewhere closer to £30 million than to £20 million. Do not forget that until 2010, we had £40 million.
Q27 Brendan O'Hara: Yes, of course. Can I ask then what stage those discussions with the DCMS and the Treasury currently are at?
William Shawcross: As I said, we were hoping to start the consultation and we had permission from the Government to do so, authority from the Government, in May this year. Then the election was called and that put things on the backburner for a time. I would like to start them before I leave, but we will see whether that is possible or not.
Helen Stephenson: Certainly we are having very positive discussions with officials in both Treasury and DCMS and indeed have met Ministers. I am hoping that those are positive and we will be able to proceed quite promptly.
Q28 Brendan O'Hara: Just to clarify, since the election in June, there have been no formal meetings between the Commission and the Treasury and DCMS?
William Shawcross: Yes, many, many.
Q29 Brendan O'Hara: To discuss a sustainable funding model?
William Shawcross: Yes. We have had lots of discussions on these and other issues.
Q30 Brendan O'Hara: Where are those discussions at the moment? I thought you had said that you were waiting to have those discussions.
William Shawcross: No, we are not waiting to have the discussions. I am waiting for the green light to go to consultation with the sector. I would love that to come before Christmas. It would be a wonderful Christmas present if we got that and I would be on my bike.
Q31 Brendan O'Hara: Do you feel you have been sufficiently supported by both Treasury and
Q32 DCMS in what you are trying to achieve?
William Shawcross: All of our engagements—I have been very lucky over the last five years—with both Treasury, DCMS and other Departments, I have had a very happy relationship with them all and they have been very supportive. The Treasury has not been able to give us as much money as I would have liked, but everybody has that component and it is pretty tough for the Treasury to make decisions. I have continued nonetheless to argue that we are running on empty. That is why we have been pressing for sector consultation and I really do hope that we can start that before the end of the year.
Q33 Giles Watling: I wanted to touch on fundraising. We sometimes hear stories of aggressive fundraising, vulnerable people being called at home, fake interviews on the street, often ending with monthly contributions being taken from people and so forth. I myself have made appeals from stage in the theatre, I have literally a captive audience, which could be described as aggressive fundraising, but you said recently in an interview that the new system of governance for fundraising was rather effective. What do you base that judgment on?
William Shawcross: I hope it is. When the fundraising scandals broke in 2015 after the tragic death of Olive Cooke and The Daily Mail investigation, which showed that some big charities had outsourced their telephone fundraising to companies that were using rather unscrupulous methods—bullying methods—it was an outrageous discovery and scandalous. I think the newspaper did the charities a service in exposing it, because it should not have happened. The Government—Rob Wilson was then our Minister, and he responded with horror, as we all did. He called in the major charities and said, “You have to get your house in order”.
Fundraising regulation has never been part of our remit. Charities have always regulated themselves and that is under the 2006 law. Under the 2011 law, it was not given to us. But Rob Wilson said to the charities, “Unless you set up your own fundraising regulator and police yourselves effectively, then we will legislate to hand this duty over to the Commission”. They have set up their own regulator, which is chaired by Michael Grade, and I think it is pretty efficient at stopping bad practices, such that you noted. I certainly hope so, because charities depend entirely on the goodwill of the public and if they are seen to behave that badly, that goodwill will dissipate.
Q34 Giles Watling: Would you rather have oversight of that yourselves, as the Commission?
William Shawcross: Not unless our budget is substantially increased.
Q35 Giles Watling: I thought it might come to that. Are there continuing issues with the fundraising governance system? If so, what priorities do you think the new chair should take on this?
William Shawcross: As I say, it is not our responsibility under law, but the new chair should—and Helen I know does already—collaborate and work very closely with the chief executive of the fundraising commission. We have a member of staff who works for both of us, so we collaborate quite closely with them. Tell me, all of you, if I am wrong, but I hope that you will have received fewer complaints from constituents about fundraising methods than you might have received three or four years ago. That certainly should be the case. If it is not, you should report any charity that is accused of anything to the fundraising regulator.
Giles Watling: That is certainly the case in Clacton-on-Sea. Thank you.
Q36 Paul Farrelly: Mr Shawcross, could I just add to the Chair’s congratulations? Congratulations on your books. I had barely reached voting age when I read “Kissinger, Nixon and the Destruction of Cambodia” which is still on my bookshelves alongside Neil Sheehan’s “A Bright Shining Lie” about Vietnam.
William Shawcross: Thank you. It is a long time ago.
Paul Farrelly: Yes, 1979, just looking back. When you came into this job, has it turned out to be rather more of an effort than you imagined in the new world that we live in?
William Shawcross: Yes, but it has also turned out to be more a joy or a great pleasure than I had ever expected, because we are, as I said, involved in a really important and marvellous part of British life—English and Welsh life, I should say—and my staff will forgive me if I quote to you. They say, “God, William, not again”. William Beveridge described philanthropy in this country as, “A golden thread in the living tapestry of our national history”. He wrote that in 1948, at the same time as the Labour Party created the welfare state, according to his plan, as it were. I think it still is a golden thread and it has been a privilege to be working for the last five years to try to keep that thread strong and make it grow even better and to burnish it and to get rid of any threads that are black rather than gold, any threadlets.
Anyway, it has been a wonderful job, but much busier than expected. The new chair will have to expect, I think, to work many more days than are prescribed. When I joined, I was told that they were going to reduce the number of days’ work from three to two and it has never been two days a week. In fact, when I was reappointed for my second term, I said, “Please would you raise the number of days to three days a week to make it that I am allowed to be there three days a week?” But I am often there four.
Q37 Paul Farrelly: I ask the question, because my only contact with the Charity Commission dates back to when Dame Suzi Leather became the chair and she had just been the chair of the Human Fertilisation and Embryology Authority. The perennial issue was should schools be charities and benefit from the VAT exemptions for private fees, but otherwise it seemed quite a nice still backwater. Has it been anything but?
William Shawcross: When I arrived, it was a sort of perfect storm. A few weeks after I arrived, The Times ran front pages for about four or five days about a charity called the Cup Trust, which we had registered, and that was found out to be—or alleged to be—not a charity for children’s playing fields, but a complicated tax dodge. I was hauled off before Mrs Hodge and given a roasting. She said at one stage, “This little quango should be put on the bonfire” and unleashed the NAO on us. As you know, the first NAO report in 2013 was pretty terrible, pointing out all the things that were bad with the Commission, many of which were correct.
We began the process of transformation with a much more vigorous board and a new chief executive, Paula Sussex, who masterminded the transformation programme with the £8 million that the Chancellor gave us. The next NAO report at the end of 2015 was much better and this NAO report today is better still, I am glad to say, but we must not be complacent. As the NAO points out, there is still progress to be made. But apart from that, the PAC and the NAO and the fundraising scandals and other high-profile cases, yes, there has been a lot going on, but it is fascinating and I have really enjoyed it and I wish I had gone into public service before.
Q38 Paul Farrelly: I do not want to go back over the schools issue.
William Shawcross: I am happy to go over it.
Paul Farrelly: But I do want to ask one question, because it has not quite gone away, because the Labour Party manifesto, which did not get much scrutiny in the election, proposed to pay for certain things by levelling VAT on private school fees, as I recall, which is more complicated because you then have to change charity law. Have you done any contingency planning for a Labour Government?
William Shawcross: You carry on.
Helen Stephenson: I think what you are describing is the fact that the charities sector is so endemic to every area of public life. Even though I have a really strong background in and around the charities sector, I think one of the things that has really surprised me coming into the Commission is just how important the charities sector is to every area of public life, from education, health, security. Absolutely it is such an important part of our public life, the number of Departments across Government who in some way have some of their activities delivered either with or through the charities sector and therefore the importance that we place on it.
Quite a lot of business across Government has been a surprise to me, coming into the Commission. Just one area in terms of housing associations and changes to the Housing and Planning Act in 2016 has required some housing associations to apply to us if they need to use their land to apply broadband cables. We have a series of those kinds of issues in my queue of permissions that we need to get to. These are important things that are crucial to our communities. I think you are right; every area of public life has some implication.
Q39 Paul Farrelly: Just to satisfy a bit of curiosity, following our manifesto pledge, have you had people writing reports, preparing the ground for the possibility of Jeremy Corbyn becoming Prime Minister?
William Shawcross: It is not really for us to speculate what will happen at the next election, but I would say historically on the schools question, in 2011 there was a case brought before I joined about our guidance to independent schools. The court found that it was not for us to tell trustees of independent schools how much public benefit they should give and it was for the trustees themselves to decide. That was a very important case, because it reflects not just the position in independent schools obviously, but more widely.
Q40 Paul Farrelly: Can I just move on to the fundraising, which is what I just wanted to come in on? The spectacle of big charities, big respected charities, and some of the practices that we saw and read about, breaches of data protection, do you think, Mr Shawcross, that some of those charities have perhaps in their behaviour lost sight of how they should conduct themselves because it has become a very well-paid big business operation, dog eat dog, in the pool for fundraising from our pockets?
William Shawcross: I do not want to endorse that description of charities, but I think that you are right, some big charities had certainly taken their eye off the ball and allowed their commercial fundraising arms, whom they retained, to behave badly—they probably did not know that they were behaving so badly, but it was the job of the trustees to know and they should have known. It was extremely damaging to the charitable world that these practices were going on. As I said before, I think it is a service that the press did to charities—it was very uncomfortable for some of them—that these horrible practices were exposed. They should have been and they should not have happened, you are quite right.
Q41 Paul Farrelly: I just have one final area of questioning. I have just had to remind myself that the Health Lottery has a charitable arm called the People’s Health Trust and it pledges to give 20p in the pound to good causes. What, if any, role do you have in making sure that that 20p is 20p and not a penny less?
William Shawcross: I do not know the answer to that, but we will check it out and get it to you. I apologise, I should know, I am sure.
Helen Stephenson: Obviously I do not know the extent to which it is one of our charities on the register, so we will check that and get back to you.
Q42 Paul Farrelly: The owner is waving his hands up and down now wanting to bid for the National Lottery in the future when it comes up.
William Shawcross: No, it is an important question.
Paul Farrelly: That reminds me, we produced a report, which was quite a good report, just before the 2015 election—we had to finish it for the 2015 election—on lotteries, and the Government has not yet given a response, so perhaps we might chase them.
Chair: Chase the Charities Minister on that—exactly.
Q43 Julian Knight: Briefly in the area of countering extremism and your Commission’s role in monitoring where the money is going, do you feel you have the resources—the wherewithal, the experience, if you like— and also the engagement crucially in order to ensure that the money is going where it should be going and is not ending up funding extremist activities?
William Shawcross: As I mentioned, extremism is one of the three priorities my board states were our priorities back in 2013 when I joined and created the new board. It is something we have looked at. We keep a very, very sharp eye. I think you said do we have the resources and the experience. We never have enough resources for anything, but we do put quite a lot of resources into our intelligence arm and people looking at extremism. We work closely with all the security services and any information that we get on that, we follow it very fast. It is a priority and it is a really serious issue.
Q44 Julian Knight: The third part of that is I am still not certain what a sharp eye means in that regard. You say about security services. Is that the total of your engagement? Because the crucial thing is, I cover a constituency near Birmingham and I see a lot of activity within the BME community into the charities. It is like a more informal approach to charity and charity fundraising that often takes place.
William Shawcross: Sorry, the informal approach takes place with whom?
Julian Knight: Basically what I am saying is that where my constituency is, I am bordering on Birmingham. Often what I notice as well with the BME community within Birmingham is there is quite an informal approach to charity fundraising, there is a passing of the collection tin and so on, “This is going to our people overseas, going to our brethren overseas” in that regard. That is often the sort of phraseology used. What I am trying to get to the bottom of is basically to understand where is your engagement with the communities, where is your understanding of it? Do you see that as an important part effectively of both countering extremism and also oversight?
William Shawcross: It is of course a very important part and a continuing part. Interestingly, oddly enough, I have spent quite a lot of time going to Birmingham with Khalid Mahmood, your Labour colleague from Perry Barr, and he has the same concerns as you. He has taken me around Birmingham and introduced me to a lot of people who he knows and that has been very helpful.
In terms of street fundraising going amiss, we had one serious case of that a couple of years ago, I think in Leeds, and we came right down on that. But it is something that is very hard for us to control. We cannot be on every street in Birmingham checking money being put into tins is going in the right direction, but whenever we hear of or have allegations of the misuse of funds, we obviously do our best to investigate them as quickly as we can.
Q45 Julian Knight: Of the 187 inquiries that you mentioned, Helen, how many of those are related potentially to extremism? Please also follow up with what you were going to say.
Helen Stephenson: What I was going to say is that the behaviour you describe I think is often found in faith-based charities that have high numbers of members who collect money from their congregation or the membership. We do have a project that is supporting faith-based organisations of all faiths to both register with us and therefore to understand why good governance is important in all these areas. I would say that we take it seriously across all of the faiths.
In terms of the numbers of inquiries that we have opened in the last year, we do publish all that data on our website. I can certainly come back to you in terms of the actual proportion of numbers that related to certain cases. But we need to make sure as an organisation that we are transparent about the inquiries that we operate and that there is no institutional bias for us as an organisation. Every six months we publish data about the inquiries that we have opened.
Q46 Julian Knight: Do you separate out potential instances where money may be finding its way to extremism activities among those 187 inquiries?
Helen Stephenson: Obviously that is an incredibly serious issue. You ask what is a high risk for me as the chief exec and that would be up there with the highest of risks that we would want to follow up on. Yes, we are very alert to that. I am not going to go into too much detail about the way we operate, as I am sure you would appreciate.
Q47 Julian Knight: It is good that you are alert to it, but I am not convinced that you understand or have a figure effectively on the number of cases that are coming forward to you of this activity and then you are tracing that back and following it through.
William Shawcross: I think we do know. The issue of extremism is crucial to us and you understand why. Both the Prime Minister and the Home Secretary have emphasised recently how important it is. In the year up to March 2017, we had 286 statutory inquiries open, of which 14 were classified under religious activities, and of those 14, two were classified as Islamic charities. Others were perhaps—I do not have the details in front of me—Sikh extremism, Hindu extremism or whatever.
Q48 Julian Knight: That is half of 1% basically is religious activity?
William Shawcross: In the statutory inquiries, which is our most important, but that does not mean to say we were not looking at many other religious charities and had information or concerns expressed about other religious charities.
Q49 Julian Knight: Do you think that half of 1% really reflects the true measure of the issue?
William Shawcross: Those are the numbers that we have as to the most serious allegations. That is all I can really say to you, but I would love to come and talk to you or come to Birmingham and visit you in your constituency and talk to you about that.
Q50 Julian Knight: It is Solihull. It is next to Birmingham, just to make that point. My predecessor made the mistake of saying it is a suburb. That is one of the reasons why they are my predecessor.
William Shawcross: But it is a concern that you obviously have and I would be very happy to come and talk to you about it.
Julian Knight: Very good, thank you very much.
William Shawcross: I share your concerns. It is a hugely important part of the problem for the future of our country.
Q51 Chair: Obviously you have a lot of contact with charities seeking to register. That is an important part of them being recognised as a charity and being able to function as a charity and enjoy the benefits that being a registered charity offers. Do you think that enough charities, particularly smaller charities, understand what sort of services and support the Commission can offer them? Does more need to be done to make people aware of the work that you do and can do working for charities?
Helen Stephenson: I would love to do more on this, because I think you are absolutely right. As I said, there are hundreds of thousands of volunteer trustees out there. I would love to be able to have much more of a direct relationship with them, being able to inform them. One of our projects and one of our transformation programmes is to make ourselves more open digitally. I would like to make more of our guidance more accessible in that way. We have a much better newsletter, if you like, that goes out to all trustees that we have e-mails for.
We are getting better at that, but I would love to do this in more of an accessible format that is more interactive, with people being able to engage with us more effectively. That would be my hope and aspiration going forward. You make an important point, that the recent research that was published, “Taken on Trust” which looked into a number of trustees, we were probably the main official way in which trustees found out about their duties. We need to do more to equip them both with the responsibilities of being a trustee, but also with tools to enable them to do that effectively. That is absolutely what I would want to do going forward.
Q52 Chair: As part of the change programme within the organisation, do you monitor increased contact from charities requesting help, support, advice and do you have targets for that?
Helen Stephenson: Yes. We have a newly-formed digital communications team. The deadline for accounts has just recently passed. That has traditionally been a time when we have a lot of traffic, we have had a lot of people coming on to the phones or submitting forms. By better use of our guidance, by better use of our communications out digitally through our tweets and so on, we were able to increase the traffic to our website so that the trustees could get the information they needed from the website rather than trying to phone in or submit queries to us. That is an example of where we have made progress on getting information to trustees more directly, enabling them to file on time and enabling them to do so in a way that they do not need to try to engage with us. Absolutely, really good point.
Q53 Paul Farrelly: You were just talking about filing accounts then. If you go to Companies House with all the huge number of companies, the only effective penalty for filing your accounts late or not at all is bad publicity, which is what reputable people seek to avoid. Maybe, Ms Stephenson, this is not the right question for you, but perhaps for Mr Shawcross. I have read through all the NAO reports, the Select Committee reports into the Charity Commission, and it seems to me that they are approaching you as if you are a banking regulator, a prudential regulator with all the powers that they have. At some stage in your five years, along with Paula Sussex, did you ever tear your hair out and say, “These people are expecting the world, but we do not have all the powers we need to do it”?
William Shawcross: I did not tear my hair out, fortunately, but it is obviously frustrating. I wish we had more powers. I argued very strongly in 2014-15 for new powers and I am glad to say that the Government responded very quickly, immediately after the May 2015 election, and we got the Act. I think it was the first piece of legislation that was introduced after the election and it started in the House of Lords because there was so much pressure in the Commons. That Act has given us substantial new powers and I am really grateful to parliamentarians on all sides for agreeing to that Act and voting for that Act; it has helped us a lot. But of course you are right, we are not like a banking regulator and we never will be, nor perhaps should we be. We are there to guide and we are there to stop the few bad charities.
Helen Stephenson: Also we do not just rely on our official powers.
William Shawcross: That is true.
Helen Stephenson: If a charity files its accounts late, it is flagged on the register, so if you want to give money to it, you can look on the register and see that it has filed its accounts late. If it files its accounts late for two years in a row, then it goes into an inquiry. We have a class inquiry going at the moment, so every charity that files its accounts late for two years, we will investigate.
Q54 Paul Farrelly: The natural question then to ask finally, Mr Shawcross, is if you could leave your successor any new powers to fill any gaps as a late Christmas present, what would they be?
William Shawcross: They would be the power to ask the Treasury to increase our funding at least by the rate of inflation every year.
Q55 Chair: As we are drawing towards the close of the session, Mr Shawcross, while I am sure you would not wish to direct your successor or give them unnecessary advice, from your experiences at the Charity Commission, what are the most important lessons you have drawn from it that you think should be noted for the Committee and for your successor?
William Shawcross: We have probably discussed them already. First, I would say this is a wonderful part of the national life to be overseeing, secondly that you have very, very superb staff. I have been really impressed by our staff over the last five years. They are very overstretched because we are under-resourced. We had 400 staff five, six years ago, before the budget was cut, and now we are under 300 staff policing the whole of this huge area, as you say, because there is no way we can read every annual report and so on. I would say you have one of the important areas of English and Welsh life. You have a very good staff to run and they are overstretched, but I think the organisation is stronger than it was five years ago. The only thing, you will have to do more than two days a week work.
Q56 Chair: On behalf of the Committee, thank you very much for your evidence today and good luck in your remaining weeks as Chair of the Charity Commission.
William Shawcross: Thank you. It has been a great pleasure appearing before you. Thank you very much, all of you.