Charities are to be banned from using “tax payers’ money” to influence Parliament, Government or Political Parties, the so called “sock puppet” issue.
The Government has decided to introduce this change in legislation, as a result of a campaign led by a charity, The Institute of Economic Affairs (IEA). The IEA proudly boasts that it receives no Government funding, though, as I shall explore below, this is a half truth at best.
Although charities are supposed to be apolitical, the IEA is a right wing – as in corporate-libertarian American Tea-Party style, right-wing, not jack-booted, flag-waving nationalist thug right-wing, “think tank”, beloved of Margaret Thatcher. It has blazed the trail for the neoliberal ideology, where the market is king, Government is bad and regulation is positively evil.
The IEA has previously taken money from big tobacco while challenging regulations to make smoking less attractive and more expensive; and scores very low on the transparency around its own funding – though one step up from the execrable Taxpayers Alliance. Even so, given their own opacity, one might think they were not the best people to decide how other charities raise or spend their money.
Unusually for a significant change in legislation, there will be no consultation period, and no opportunity for charities, or anyone else, to comment, suggest unforeseen circumstances, or seek to amend the legislation. Whether you agree with the corporate libertarians at the IEA, as the New Philanthropy Capital think-tank has mused
“What is clear though is that this is an extraordinarily poor way to make public policy—no consultation, little clarity about how it will practically work, and all on the back of some pretty thin, and ideologically driven, research.”
A letter sent to Cameron protesting against this decision has been signed by about 150 CEO’s of charities, including some of the very large Grant Making Trusts. This is also highly unusual as the GMTs don’t tend to like being drawn into the party political arena. Clearly they are very concerned about what is one more brazen attack on the Charity Sector.
What is all the fuss about? The IEA sock-puppet campaign has been running for about four years now. Initially funded from the IEA’s own sources, in 2014 someone liked what they were doing enough to bung them £15k to do more work on it. That was money well spent, as two years later, the Government has decided to change the rules. Because the IEA are opaque about who funds them, the donor (corporate or individual) remains anonymous. And of course they are entirely within their rights to remain anonymous.
The complaint was that charity recipients of tax payers’ money, and in particular grants from Government departments or Agencies, were using this money to lobby Government. That lobbying might be for a change in the law, or to better implement an existing law, or indeed to lobby for a load of regulations to be ditched. It might also include lobbying for more money to be spent on something, or less. It’s a very broad area, isn’t it?
The sock-puppet analogy was that Government was in effect talking to itself but pretending that it was someone else doing the talking. But the analogy only works if you assume that what is being said, already chimes with what the Government wants to hear. Which is extremely ironic, because that is exactly what this gagging of charities will actually happen in practice – because Charities tend to say the things Governments really don’t want to hear.
What it won’t stop is the highly effective lobbying of Government by a veritable phalanx of right-wing thinktanks such as the IEA, Policy Exchange, CPS, CSJ, Taxpayers Alliance, Adam Smith Institute and so on and so on. But who funds these outfits? It’s very difficult to say, as their funding is so opaque. However, the IEA has let slip that it is funded by The Nigel Vinson Charitable Trust. Vinson is also a funder of the Global Warming Policy Foundation. Another funder of the GWPF is Neil Record, who has recently been appointed chair of the IEA.
Where else might their £2m a year income emanate? Like so many other British corporate-libertarian organisations, we need to look across the Atlantic to the USA. The IEA receives a lot of funding from the Earhart Foundation – over 50% of the $2M funding IEA received from American charitable foundations between 1996 and 2013, according to climate change blog Desmogblog. The Earhart Foundation supports libertarian causes in the states, as does the Atlas Economic Research Foundation (now Network), which is a sister organisation to the IEA and funds it via American Friends of the IEA.
But there’s another place which the IEA gets its funding from, much closer to home. And it’s Taxpayers’ money! Because every individual or corporate donation or subscription the IEA receives from an individual taxpayer of a company that has declared a gross profit, is eligible for a tax refund, also known as gift aid.
The IEA declare voluntary income of £1.7M last year. If everyone who gave money to the IEA was willing to sign the form to allow gift aid to be claimed at 20% (the basic rate), That would mean £340,000 of their income came from the tax payer. But you can imagine that, given the IEA’s raison d’etre, a significant proportion of supporters will be paying tax at the top rate, at least those who are paying any tax in this country and not just offshoring all their income to tax havens. So these supporters will be able to reclaim up to 40% of their tax paid (to the Government) and hand it over to their favourite think tank. Assuming all the donors to the IEA were top rate taxpayers then £680,000 of tax-payer’s money was handed to the IEA last year. The same applies to companies who can donate part of their pre-tax profits to the IEA who can then claim back the tax rebate at 20%.
Given that the IEA receives between £340,000 and £680,000 a year from “tax-payers’ money”, specifically to influence Government Policy, it may just rue the day it decided to create the sock-puppet campaign.
Excellent, informative post Miles thank you
Not quite the same wavelength as yours but ….
government desire to control, reform FoI so the public can’t mount effective challenges etc.all contributes to the debate and it may well spur people seeking change to increase donations specifically for lobby / advocacy / challenge Govt. People may review donations to large NGOs who they deem not up to the mark? OK not mega millions but sends a message to government whose practice is not always open and transparent either?
Large NGOs are effectively gagged and do not criticise the ‘establishment’ any more these days …. look at the ‘poor’ RSPB and the ‘Hen Harrier campaign’, an interesting response, or lack of to the ‘ban lead ammunition’ campaign as well?
The fact that the public fund government and government fund private through industrial subsidies etc. At least across the pond it is blatantly clear that you buy seats, here the only time the public are required is to pay lip service to ‘democracy’ aka two horse farce?
Rant over ….
Yes I think it’s entirely plausible that donors could specify that they wanted their donation/membership subscription/etc to be used for advocacy or campaigning purposes. And I also agree that people may increasingly feel that the money they give the big NGOs is not being used in a way that they would wish it was.
I also agree that there needs to be a major challenge to the huge subsidies paid to private sector organisations, and the extent to which these are used to lobby governments. Why should the Charity Sector be singled out?
Unlike commercial lobby who make donations to party coffers (various parties) ‘real’ charities are unlikely to, rather they might rally critical mass of collaborative grass roots to challenge and seek reform etc.?
Then again one might pose a question about the big universities and charitable status, particularly when the fees are forever skyward – all helps to keep folk in debt and focused on monetary ambition?
With regards to John’s point about gift aid – it’s a wonder they’ve not tried to cut that to stop these pesky critics?
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I am not sure that the repayment of tax by HMRC on charitable donations made under gift aid would legally be deemed to be ‘government funding’. As I understand it, and I may be mistaken, any tax-payer who makes a charitable donation under gift aid receives tax relief on that donation. Effectively the HMRC pays back the tax he/she has paid because income used as a gift aid donation is not deemed to be taxable. If this is the legal basis for gift aid then all the HMRC is doing is passing on that proportion of the donor’s income which they have taxed to the charity ie they are cancelling the tax and paying on a part of the donor’s own money. This would mean that any re-payments of tax made by HMRC to charities should legally be deemed to belong to the donors and not the government. I hope that this is the case because so many charities depend so heavily on tax repayments for gift aid that it would be difficult, if not impossible, to determine whether such income was being applied to lobbying even if it might make things difficult for the IEA.
thanks John. I was careful to use the same wording as is used in the government guidance ie “tax payers’ money”, not “Government funding”. Gift Aid is definitely tax payers’ money, because it is derived from tax paid to the exchequer. The money that Gift Aid provides, belongs to the charity, but only in the sense that a grant from a Government department or agency belongs to the charity, if it is paid to them. The bottom line though is that Gift Aid comes from the Exchequer and is Tax Payers’ money – I can’t see any way around that. If there are tax experts out there who can give a more nuanced view then I’d be delighted to hear it.
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