Leading charities through a time of change

(Published 9 June 2010)

Dame Suzi Leather speaking at Westminster central Hall on 9 June 2010 at ‘Leading charities through a time of change’ event for charity trustees, directors and finance directors.

Good morning and thank-you.

I am delighted to be here with you this morning in what is a truly remarkable venue.

Not just for its architecture and its atmosphere, but remarkable for its history, the events it has witnessed.

You may already know that the UN General Assembly held its first ever meeting in this hall in 1946. Or that previous speakers here include the Queen, Mahatma Gandhi and Winston Churchill.

I haven’t come here, you’ll be relieved, to offer “nothing but blood, toil, tears and sweat” as Churchill once did.

That would be a slight exaggeration.

But my purpose today is to help you look at the bigger picture for charities. And that bigger picture does include some unsettling scenes.

I know that some of the other speakers will be offering detailed financial advice and updating you on developments in the law.

I will touch later on some of the ways charities can adapt to the economic climate, but I’d like to start by inviting you to take a broad perspective.

That, to me, is part of the job of the Commission – it’s part of the value of having an independent regulator for charities:

We can take an eagle-eye view of the sector. A view that is sharpened by the knowledge and expertise we gain from the thousands of charities on our hugely diverse register.

Many of us feel instinctively that the sector is living through a period of unprecedented reform, upheaval, and opportunity.

It’s certainly a time marked by apparent contradictions:

In political terms, this sector has arrived.

As we’ve just heard from Francis, we have a government that’s placed the concept of civic involvement, of ‘the big society’ at the very centre of their programme for reform.

The government has pledged to devolve power to communities, to incentivise charitable giving, to promote volunteering.

The vision cuts across party boundaries –

One of the most interesting features of the recent election campaign was the marked consensus about the role of civil society.

The main parties now recognise that the civic ties between us – those that form beyond state structures and market challenges – are vital to social cohesion.

All parties understand that where those bonds are weak, the state will struggle to make up for the social problems that ensue.

This outlook isn’t restricted to a political elite – it reflects the confidence the British people have in charities.

I have the privilege to be able to offer you a sneak preview of the Commission’s new Public Trust and Confidence survey, which we hope to publish in the coming weeks.

As the name suggests, it measures people’s faith in the benefit and probity of charities.

You might want to a take a peek at it once it’s out – it makes for some interesting reading.

The survey shows that public trust in charities is high, and that it’s holding up.

Forty percent of people give charities a trust rating of eight out of ten or above. That’s up from thirty-five percent last time we asked in 2008.

And in May, YouGov carried out a poll which shows that three out of five people in the UK expect charities to play a more important role in coming years.

So we have a government that says it’s committed to developing the sector;

We have political consensus about the role of charities;

And we have a public which invests faith and hope in the work we do.

That’s on the one hand.

On the other hand we have the cuts.

It’s not my intention to dent the optimism that continues to be high among charities.

But the cuts are going to come quick and they are going to go deep.

The Prime Minister himself confirmed this week that the spending reductions we face will ‘affect our whole way of life’.

And many commentators are saying that the cuts will be more severe than those made during Margaret Thatcher’s terms in office.

We at the Charity Commission have been among those warning about what’s to come.

Warning that while charities may not have felt the effects of recession as keenly as other sectors so far, that doesn’t mean they’ve dodged the bullet.

The way of life for charities will have to change along with everyone else’s.

The numbers bear us out – the sector is beginning to feel the pinch.

As many of you know, the Commission surveys charities regularly to find out how the downturn has been affecting their organisations.

We publish the results in our Economic Survey of Charities.

During the survey conducted in September 2008, just under forty percent of charities told us they were affected by what we then knew as the ‘credit crunch’.

By the time we carried out the fourth survey in March this year that number had risen to nearly sixty percent.

In real terms, that means an extra thirty-six thousand charities across England and Wales have been impacted in the past 18 months.

The NCVO’s recent research also paints a worrying picture.

Their Civil Society Almanac, published in April, reveals that twenty-three thousand charities rely on local government funding for more than half their income.

Many of the charities that depend on public grants are also seeing greater than ever demands on their services. So they’re effectively being squeezed from both ends.

Added to which, as our survey shows, sixty percent of charities relying on investment income are seeing their yields decline.

I’ve just used a lot of numbers, I know – but on this occasion, I don’t want to apologise for that. These numbers are important. We all need to realise how extensively charities stand to be hit.

Given these figures, it’s questionable whether the voluntary and charity sector will be able to fill all the gaps left by cuts to public services.

In many cases, they have already been that public service.

So the question facing the sector now is: how to respond.

  • How to make the most of new opportunities to provide service in areas such as education, crime prevention, care, the environment;
  • How to cope with reduced returns on investments;
  • At a time when competition for public funds is getting fiercer than we’ve ever known it to be.

Well, the theme for this event is change, and that’s a word I’d like to recommend you consider with the open-minded scepticism that I’ve come to expect from this sector.

We know that all around us, old, supposed certainties are being challenged.

The recession and its causes have shaken our confidence that, so long as the FTSE is healthy, so long as house prices are rising, our economic future must be secure.

Concerns about our planet’s finite resources are beginning – slowly – to weaken our addiction to carbon heavy lifestyle.

And the new politics hailed by the coalition has forced us to question political tribalisms and reconsider party prejudices.

Charities face some fairly big questions too. And each of you must decide how you can adapt – and where your non-negotiables lie.

I have a few suggestions as to how, and where, charities might wish to draw the line.

First – the changes – what charities can do to adapt their ways of working to a tougher economic climate.

Collaboration is a buzz word nowadays, and I believe charities could do more of that.

Charities could be more proactive in recognising where they have common objects, common beneficiaries and common goals.

And where they’ve made that recognition – working together to meet shared aims.

In November last year, the Commission published guidance for charities on collaborative working.

It sets out the ways in which charities can work together to enhance outcomes and improve efficiency.

I think there’s space for more mergers, more consolidation where charities have similar aims. This is not the time to be precious about names, or brands or personalities.

But collaboration doesn’t have to involve formal mergers.

An example:

Thames Reach and Blenheim CDP are two charities, both working in London. Thames Reach works with homeless people, Blenheim CDP provides services to people with substance abuse problems.

They collaborated on a project to help homeless people with drug problems and realised that their work was related, that they could complement each other.

They signed a Memorandum of Understanding and now work together on a range of projects. They share resources, and exchange knowledge.

I met John Jolly, the CEO of Blenheim CDP last year. I was struck by his pragmatic, positive approach – his driving motivation is to improve the experiences of beneficiaries.

And that’s the next recommendation I would like to make: think first of the users of your services.

Increasingly, your charity will need to convince service users that you’ve got the edge – that will become as relevant as the skills you invest in bidding for public funding.

The word to remember is personalisation – in a consumer age, users will expect you, where reasonable, to tailor the service to their needs and preferences.

This can be a challenge:

Charities providing care for people with disabilities, for instance, are finding that some of their customers want to receive support in their own homes, in their own time. While others continue to value the security of residential care.

You’ll also need to find ways of demonstrating to others why your charity is providing the best outcomes.

Commissioners won’t be taking your word for it.

I understand why cutting down on evaluation can seem like an easy option in tough times. But if you’re competing to provide services, you really can’t afford to.

What else can you do to survive the economic ice-age?

One obvious opportunity is technology. A lot of the basics – such as communicating with donors and members – can be done more cheaply now than ever before.

I’ll use us an example for this one -

The Charity Commission hasn’t been immune from spending cuts. By March of next year, we’ll have lost 178 members of staff – a 30 percent reduction in six years.

We’ve been keen to ensure these cuts don’t lessen the quality of service we provide.

So we’ve focused on making more of our core functions available online.

  • You can now register online.
  • All our guidance is available online.
  • And we’re about to launch a new section of our website dedicated to the needs of the smallest charities.

I didn’t come here to boast, but I’m proud that, despite the cuts, we’ve managed to improve our services to you.

We’ve exceeded our targets on customer service, we’ve speeded up the time it takes new charities to register and we’re getting quicker at investigating complaints.

Of course there are limits to what we can do. And I am concerned that the Commission can’t continue to deliver all its present services and functions while absorbing further significant funding cuts.

But, my point is that a lot of the improvement we have made is down to a more effective use of technology.

I urge you to think digital too.

Are television adverts always the best option for larger charities – in an age of social networking, isn’t social marketing the way forward?

And we know that people don’t like receiving endless glossy mailings through their door – even from charities they sympathise with and support.

The same goes for freebies – they may not be the best way to demonstrate you’re putting your beneficiaries first.

It’s not for the Commission to take decisions about spending – it’s for your boards to decide how to allocate funds to marketing and awareness-raising.

I’m not going to pretend that all charities can cut costs painlessly. Of course this is going to hurt.

In some cases, you may have to think again about what’s essential to your service, and what’s a luxury.

That is always going to be an individual choice for a charity and boards need to prepare for moral discomfort, for difficult discussions, for some fundamental debates about the role and purpose of their organisations.

Again - the Charity Commission isn’t here to tell each organisation exactly how far it should compromise on quality to secure survival.

But our role is to help safeguard the concept of charity, to help protect its status.

And so to the things that shouldn’t change, to the things we shouldn’t give up on – whatever the economic or political climate.

The big one is public benefit. This is what distinguishes charities.

What does it mean?

Quite simply, it means that a charity’s main purpose, the reason for its existence, must bring clear benefit, and must be accessible to the public. Charities aren’t exclusive clubs.

This is fundamental. It demonstrates just how seriously this country takes the idea of charity, just how precious the concept is to us.

An example: many of you will know that the 2006 Act removed automatic charitable status for organisations furthering religion, promoting education, or relieving poverty.

The act preserved the principle that these three areas could be charitable, but clarified that all charities have the obligation to comply with the public benefit requirement.

Why is it so important to protect this principle in charity?

Because if we blur the boundaries we risk losing the public trust I spoke about earlier.

And while many charities rely, at least in part, on public grants, far more depend on the generosity of the public.

I am convinced that the overwhelming majority of charities can and do meet the public benefit requirement.

We have 800,000 trustees in England and Wales and I’m sure that almost all of them are motivated by a desire to contribute to the public good.

Indeed, our consultation into trustees’ understanding of the requirement revealed that more than three quarters were fully aware of the public benefit requirement.

Of those, a remarkable 98 per cent were confident that their charity meets it.

But even organisations with the best intentions can experience mission drift; can veer away from their original aims and objects.

So I would urge every single trustee on every board of every charity to ask themselves three simple questions:

  • Who are we?
  • Who are we trying to help?
  • And how does that benefit the public?

These questions are not just helpful for charities struggling financially, looking perhaps, for ways of scaling back their activities.

Asking the fundamental questions isn’t just for the cash-strapped – it can be especially vital for charities doing well.

I spoke recently to a former trustee of the charity Womankind.

She told me that the most challenging discussions she’d experienced at a board meeting came after a 500 thousand pound cheque landed, unexpectedly, on the CEO’s desk.

The board were suddenly faced with really tough questions about what this money should mean to their charity, what it should do for the beneficiaries.

What else can’t we compromise on?

Independence is a big one. We need to rigorously enforce the principle that charities are free of party political bias.

Because, whatever the economic climate, we will always need independent voices witnessing, campaigning, advocating.

Independence also helps guarantee longevity, which in turn nurtures experience, wisdom, expertise and specialism.

And finally, I’d like to reassure you about the Commission’s work to enable and promote charities, especially the smaller, volunteer run groups.

It’s a mistake to assume that most charities nowadays are huge, corporate organisations. Or that the sector as a whole has moved away from a grassroots basis.

In fact, only around six per cent of charities have an annual income of over five hundred thousand pounds.

More than forty-five percent have incomes of less than ten thousand pounds.

So the majority of charities on our register are small, local, community based organisations – and are acting as that civic bond I spoke about earlier.

For the Charity Commission itself, these charities are a priority.

We have scaled back reporting requirements for smaller charities, so that now, only charities with incomes over £ 25,000 have to send us their Trustees’ Annual Report and their accounts.

We try to keep bureaucracy to a minimum.

Our new website is designed to be accessible for ordinary trustees and volunteers.

We’re committed to this work, and while the Commission is facing uncertain times in terms of funding, I hope that we’ll be able to continue to put the needs of small charities first.

Of course, the regulatory and enabling work of the Commission can do only so much.

The rest will be up to you – to those working, paid or unpaid – to further the causes you espouse.

I know the coming years will be tough – but I am also convinced that they will help the sector become leaner, keener and more flexible.

Charities have played a central role in our society for longer than the welfare state, for longer than political parties, even than parliament.

The oldest charity on our register, the King’s School of the Cathedral Church of Canterbury, dates back to the 6th century.

And among the newest charities that have joined the register so far this week are:

  • An overseas charity aimed at reducing poverty in Zambia by helping people develop sustainable ways of increasing agricultural output;
  • A local charity which will provide wheelchairs and other mobility services to people living in Rhyl, called Rhyl Shopmobility;
  • And national charity set up for the relief of former footballers in need.

Individual charities that have held their ground have done so by adapting to changing times, while remaining solidly committed to their core aims.

I know that approach will stand today’s charities in good stead to weather the current storms…

Thank-you.

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