In June 2012, the IEA published Sock Puppets, a report which looked at the evidence, and implications, of taxpayer funding for the large and growing element of ‘civil society’ that is politically active. This was followed in February 2013 with Euro Puppets, which discussed the endemic use of public money to finance political campaign groups in the European Union. Both papers generated public debate and drew responses from third sector organisations.

Since the first Sock Puppets paper was written, further examples have come to light, both here and abroad. As Ian Birrell reported in The Independent, the coalition government’s IF Campaign for increased foreign aid spending was ‘created by charities in collaboration with the politicians who were the purported target of their pressure’. The campaigns for minimum pricing of alcohol and plain packaging of tobacco have been largely financed by the Department of Health, and both sides of the HS2 debate have been campaigning on the taxpayer’s shilling. Meanwhile, new research from think tanks such as New Direction and the Institute of Public Affairs have highlighted the scale of state-funded activism in the EU and Australia.

Whether we describe this phenomenon as ‘government lobbying government’, ‘funding the cheerleaders’ or ‘propaganda by proxy’, using taxpayers’ money to fund special interest groups is troublesome for many reasons. Aside from the moral argument expressed by Thomas Jefferson that it is ‘sinful and tyrannical’ to ‘compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors’, it is far from clear that this is an efficient use of public money. Moreover, by crowding out grass-roots civil society organisations, the taxpayer-funded bloc of charities, quangos and NGOs distorts the national conversation and subverts the democratic process.

Even the recipients of the state’s largesse do not come away unscathed. I argued in Sock Puppets that a reliance on statutory funding left non-profit organisations vulnerable to a change in government. Sure enough, concerns about charities feeling unable to speak out against the government for fear of losing their grants have increased since the 2010 election, while those on the political right view the charity-quango axis as ‘a kind of government-in-exile’.

This week, we publish The Sock Doctrine in an effort to answer the question of what can be done to prevent taxpayers’ money being spent on political campaigning. Don Foster, Parliamentary Under Secretary of State at Department for Communities and Local Government, has said that “the government does believe that charities should be able to speak out on behalf of the communities they represent, but not that taxpayers’ money is spent inappropriately on political campaigning or lobbying.” We seek to do no more than that. Amongst the report’s recommendations are the following:

– The government should notify all departments that statutory funding is not be used to lobby politicians, publish material designed to generate support for the introduction or abolition of legislation, regulation and taxation, as well as support for changes to budgets and funding streams (this being a realistic definition of ‘political activity’). Written assurances should be required of ministers, departmental managers and trustees to ensure that the taxpayer does not subsidise political activism.

– No start-up funds should be granted to any new NGOs, charities or activist groups.

– Unrestricted grants should not be given to any third party organisation. They should be replaced by restricted grants and contracts in all circumstances.

– Charities should be required by the Charity Commission to publish how much of their income comes from statutory sources (as a total and as a proportion of income). These charities should also be required to declare in their annual accounts what proportion of their income is spent on political campaigning and lobbying.

– The Charity Commission should review its current guidance regarding how much political campaigning is permitted under existing case law and revise the advice it gives to charities accordingly.

– Any organisation that receives grants from central or local government should be subject to the same Freedom of Information obligations as a government agency. We agree with the Labour party’s recent suggestion that the Freedom of Information Act should be applied to companies and charities which receive state funding so as to achieve ‘the same openness from them as we expect from government’.

– There is a need to establish an enduring system with rules for both the recipients of state funding and the civil servants interacting with them. One interesting approach has been tried in the Australian state of Queensland where a rule is in place stating that NGOs which rely on taxpayers’ money for more than 50 per cent of their income ‘must not advocate for state or federal legislative change’. A similar system, in which organisations that receive a certain percentage of their income from statutory sources are not allowed to engage in political campaigning should be given serious consideration by the British government.

Download it here.

This article has also been published on ConservativeHome.