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Latest 06 April 2024

End charity tax breaks for dark money donations

Street sign for Tufton Street, Westminster SW1, London, England. Alamy

Charities get generous tax breaks – even for anonymous donations. But shouldn’t we know who they’re working for?

A parent who gives £100 to a local authority school will enrich it by £100. But a rich man who is content to have a hundred pounds less in his pocket can make Eton wealthier by £182. The extra £82 comes from public funds, because Eton College is registered as a charity.

In these trying times for Chancellors you might want to be sure that we, the public, are getting value from that £82. The law tries to achieve this by requiring charities to serve the public good, in the form of charitable purposes. These are defined in the Charity Act 2011, and span the spectrum from “the prevention or relief of poverty” to “the advancement of amateur sport”.

This is an imperfect mechanism.  A hedge fund manager may find bel canto transcendent and pour hundreds of millions into opera houses. Good for him – and good for them. But should you and I be forced to match-fund his enthusiasm?

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But what if it was worse than that? A huge investor in the oil industry might want to plough money into climate denial. Should we be forced to match-fund those donations? And should the charity be able to disguise whose work it is really doing?

The answer to the first question is complicated. If the organisation is a charity, we are forced to match-fund the oil industry investor. But is it really a charity? Can climate denial serve the public good? The Charity Commission has indicated that it can. The regulator says it won’t, ordinarily, intervene in the political activities of lobbyists who call themselves think-tanks. We think this is wrong and are actively considering suing the commission.

But the answer to the second question – at the moment at any rate – is simple. Charities do not have to disclose who funds them. They can do the work of the oil industry and they can have that work subsidised with your taxes. And they don’t even need to tell you whose work they are doing. They can keep the name of that oil industry investor in the dark.

We think this is wrong. And we think the incoming Labour Government should change the law. If charities take large sums of money, and they want match-funding from the public purse – from your taxes and mine – we think they should be forced to disclose where it comes from. We think this is a reasonable quid pro quo for large amounts of public money.

This question has been examined by UK accountants. 

In December 2016, the Charities ‘SORP’ Committee – the acronym stands for Statement of Recommended Practice – of the Chartered Institute of Public Finance and Accountancy considered a requirement that charities identify by name and amount their material donations. 

Those who opposed it did so principally on the basis that disclosure might reduce donations to charities. This could be so but would not need to be. What is objectionable is not anonymous giving but anonymous giving that is matched by public money. Someone wishing to make a material donation – perhaps £100,000 or more in any rolling twelve month period – could opt for the charity to disclose or not disclose that donation. If they chose not to disclose, the charity would lose the matched public funding. 

This strikes a balance between the needs of charities to raise money and the vital necessity for transparency and accountability in our fractured politics.

 

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Dark money in politics

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Dark money in politics