Tax and Fiscal Policy

It’s our money. Let us know how it’s being spent.

Stephen Bubb, chairman of the Association of Chief Executives of Voluntary Organisations (ACEVO), has written an article for the Telegraph opposing government proposals to extend the Freedom of Information Act to charities which provide public services. This was recommended in the IEA publication The Sock Doctrine in 2014. Unfortunately, Bubb’s article misrepresents the proposals, saying:

‘Just as the Government faces criticism for proposing to limit Freedom of Information (FoI) requests to Whitehall departments and other state agencies, it now wants to extend the Act to charities – all 165,290 of them.’

This is not what is being proposed. FOI would not – and should not – be extended to all charities. It would only be extended to the minority of charities that receive taxpayers’ money. Eligible FOI requests to these organisations would be limited to enquiries about how that money is being spent. It would not extend to the 75 per cent of charities that receive no funds from central or local government, nor would people be able to make enquiries to publicly funded charities about how their private donations were being spent.

The intention – clearly – is for members of the public to find out how their involuntary contributions to third party organisations are being used. Charities receive £13 billion from the government, amounting to 33 per cent of the sector’s total income. We deserve to be able to ask the same questions of these recipients as we can of government departments. Bubb’s area of interest is the charitable sector, but there is no reason why any recipient of taxpayers’ money – charity, business or quango – should not to be as accountable as a politician or bureaucrat.

Bubb claims that the new proposals are a smokescreen to divert attention from the government’s alleged intention to dilute the Freedom of Information Act when it comes to itself:

‘The justification for this move is that charities receive taxpayers’ money in some shape or form, either to provide services or to fix the church roof. Charity leaders welcome transparency and support the public’s right to know how their money is spent; and on the face of it, this proposal would appear to strengthen that right.

Yet dig a little deeper and it is evident that this measure would actually undermine FoI. It is, in truth, a rather crude tactic to divert attention from the central issue… The concern is that the review is in reality an attempt to dilute FoI and so spare the Government from scrutiny. And one is compelled to view the proposal to extend FoI to voluntary organisations in this context – as a strong-arming measure to defuse the criticism of the real dilution of openness that is threatened by this review.’

Whether or not this theory is true does not affect the merits of the case for extending FOI to state-funded charities. Efforts to dilute the Freedom of Information should be resisted, in my view, but it is irrelevant to the issue at hand. It is perfectly possible to oppose any attempt to limit the Act while also supporting proposals to extend it. The two objectives are not mutually exclusive, they are complementary. The government may be trying to divert attention from its own concerns but Bubb appears to be doing much the same thing in his article. He continues:

‘Only 6 per cent of all government expenditure with independent organisations makes its way to the charitable sector. Most of the rest goes to large companies and higher education institutions. Not only would this extension of FoI to the charity sector be minuscule, therefore, it would also be capricious.’

Publicly funded higher education institutions are already covered by the FOI Act, and rightly so. It would certainly be inconsistent to include charities while exempting companies but this is an argument for including all state-funded organisations rather than exempting charities.

Again, Bubb seems to be distracting us from the issue at hand. In a similar article published in the Guardian, Karl Wilding, director of public policy at the National Council of Voluntary Organisations, also refers to the relatively small amount of government expenditure that is directed towards charities:

‘If taxpayers want to follow the money, they should start with the 94 per cent of government grant expenditure that does not go to charities.’

This is more ‘whataboutery’. Why should we not start with charities? Regardless of whether it is six or sixty per cent of government purchases, £13 billion is not a trivial sum of money. The public should be able to use FOI to find out how this money is being used. Whether we start with charities or with other organisations is neither here nor there. All should be included.

Bubb goes on to argue that the Kids Company scandal should not be used as justification for greater transparency in the third sector.

‘Other reasons used to justify this measure do not bear scrutiny. Take, for example, the suggestion that it would help prevent calamities like the collapse and closure of Kids Company. This is disingenuous. The information about Kids Co’s mismanagement was publicly available by way of its accounts. Concerns were raised years before its final collapse, including by civil servants (and were already available under FoI). So this was not a case of a lack of public information, but of government getting it wrong.’

This is a strange argument. Many people had concerns and suspicions about Kids Company which might have been substantiated earlier if the charity had been covered by the FOI Act. The availability of financial accounts is an irrelevance. I remember looking at Kids Company’s annual reports (which contained their financial accounts) several years ago. They were glossy, vague and near-useless to anybody wanting to know exactly what it was doing with the tens of millions of pounds it received from the taxpayer.

Bubb is right to say that the government got it wrong with Kids Company, but he is wrong to assume that an investigative journalist or concerned citizen would not have exposed the mess sooner if the charity had been covered by the FOI Act. Even if Kids Company had been whiter than white, we should have been able to find out what it was doing with our cash. We might have succeeded where the government failed.

The disconcerting lesson of the Kids Company fiasco is that the government simply does not know what is being done with some of the money it hands over to third parties. This makes the case for extending the Freedom of Information Act stronger, not weaker. If the government doesn’t know what’s going on, the public won’t know either. This is why any organisation that receives taxpayers’ money – charities, businesses and quangos alike – should be answerable to the public. Extending the FOI Act will help us bypass the government and discover the truth from the horse’s mouth.

Head of Lifestyle Economics, IEA

Christopher Snowdon is the Head of Lifestyle Economics at the IEA. He is the author of The Art of Suppression, The Spirit Level Delusion and Velvet Glove; Iron Fist. His work focuses on pleasure, prohibition and dodgy statistics. He has authored a number of papers, including "Sock Puppets", "Euro Puppets", "The Proof of the Pudding", "The Crack Cocaine of Gambling" and "Free Market Solutions in Health".

2 thoughts on “It’s our money. Let us know how it’s being spent.”

  1. Posted 12/01/2016 at 14:31 | Permalink

    Chris, its right and proper that charities are accountable, both to funders and the wider public. After all, they are public benefit organisations. Sunlight is the best disinfectant and all that, and as such transparency (and tools to support this) and a culture of openness are important for the world charities now operate in. Just as importantly, as taxpayers we should all be able to follow the money and be able to challenge those in government who spend money on behalf where it goes and what is done with it.

    I’m less convinced than you are however that extending the FoI Act to charities in receipt of public money is the *best* way to ensure transparency and value for money for taxpayers. There will inevitably be an associated overhead cost that, in the case of contracts, will either get passed back to the taxpayer as a cost or reduce the viability of delivering that contract. Most of the £13bn you mention is for the delivery of adult social care, where there is already evidence that providers are not making any surplus or subsidising delivery with other funds. I’d argue that shrinking the market of providers, or adding compliance costs to thousands of delivery partners isn’t the best way of following the money.

    Instead, government commissioners and funders should agree with delivery partners before any contract or grant agreement is signed what data or information on performance and value they need, and write that into the contract. They should then publish that data upfront (i.e. make it open data) so that reasonable questions on value can be answered without recourse to FoI. At NCVO, we’ve already identified how this could happen by working with the Institute for Government:

    I’d quibble with you on one point: you’ve debated the question of whether we should follow the money by looking first at the voluntary sector or other organisations in receipt of government money. Charities deliver a tiny proportion of government services – less than 2 per cent worth in financial terms – while governments own accounts suggest that charities account for less than 6 per cent of government spending on grant making. In those financial relationships charities are relatively weak, rarely able to dictate terms. Wouldn’t it be better to start with the bigger contracts, where there is already evidence that outsourcing companies are able to outwit government procurement? Any rational analysis that had at its heart protecting taxpayers would start – though not end – with the big fish.

    Anyway, heres the NCVO argument on FoI and charities:

    Karl Wilding
    Director of Public Policy

  2. Posted 12/01/2016 at 17:27 | Permalink

    Hi Karl,

    Thanks for your comment. I don’t see any reason why we should ‘start’ with any one sector and work our way up. Let’s just bring in a blanket rule for any organisation that is spending taxpayers’ money.

    I accept your point about overheads. The FOI Act currently costs government millions of pounds and no doubt some of the requests are vexatious. However, it is money well spent for the access to information that people deserve. The same would, I believe, be true of the expense to charities, businesses and other organisations (which would ultimately be met by the taxpayer). It’s a price worth paying.

    I could be wrong, but I doubt that the adult care sector would be deluged by FOI requests. I would expect only charities involved in controversial or murky areas to be the subject of significant numbers of requests.

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