How the government uses charities to lobby itself

2008 represented something of a milestone for Britain’s charity sector as it was the year in which it received more money from government than from individuals. This was emblematic of the relationship between the state and the third sector which had been getting cosier for years and has long been controversial. With 27,000 charities dependent on statutory funding for three-quarters or more of their income, it has been argued that the government is bribing the sector into silent submission. Others have suggested that a reliance of government grants erodes independence and stifles innovation.

Today the IEA releases a paper – Sock-Puppets: How the government lobbies itself and why – which shows that the situation may be more serious than critics have realised. It argues that state-funding of charities and pressure groups constitutes a form of modern patronage, with groups whose ideology supports that of the political elite being given public money and a seat at the table while the rest of civil society is left out in the cold. In the past fifteen years, government - from the European Commission down to local councils - has given financial support to overtly political lobby groups who campaign for bigger government, new legislation, tougher regulation and higher taxes.

In so doing, the government amplifies the voices of like-minded groups and creates a distorted version of civil society. It is notable that many of the causes these groups support are viewed with apathy or hostility by much of the electorate. For example, while the European Commission funds the Young European Federalists, there is little public support for a federal Europe. Publicly funded groups who campaign for road pricing, increased foreign aid, a bigger welfare state, temperance, anti-smoking, sin taxes, bin taxes and radical feminism do not reflect the general public’s priorities. If they did, they would be able to prosper on private donations.

Sock-puppets seeks to explain the phenomenon of 'state-funded activism' using insights from public choice theory. It argues that politicians have an incentive to promote unpopular policies via third parties, especially if the third party is seen as independent, objective and wears the halo of charity. This might bean effective way of turning policy into law, but it remains objectionable for three reasons: it is a questionable use of scarce public funds, it subverts the democratic process, and it marginalises the real civil society. Moreover, it is an inherently unstable system because a new government with new priorities is faced with the choice between starving this ‘shadow state’ of its funding or sponsoring its ideological opponents.

We conclude instead that it would be better to restore the independence of the voluntary sector, safeguard taxpayers’ money and rebalance civil society in favour of grass-roots activism.

 

Click here to download a copy of Sock-Puppets: How the government lobbies itself and why.

Piper, tune, with respect to the funding-- simples. And remember what happened to the people of Hameln when the Piper didn't get paid, with respect to the obeisances expected in return from those being funded. The only thing missing in this quick informative read is the question of "capture" of legitimately-formed organisations that initially would have been considered independent v. the question of meretriciously-formed organisations that exist simply in virtue of their public funding and would not exist in any meaningful form without it.
This scandalous waste of taxpayers' money began under the Labour government. Even worse, some so - called 'charities' are terrorist organisations: See here [remainder of comment removed by moderators for legal reasons]
This information deserves to be more widely known. I wholly agree with your article's conclusion. I would be most interested to know exactly which Health Charities are among the Sock-Puppets. I hope you will provide such a list so that your readers can avoid donating to them. You may be interested to read my own article on a closely-related matter: http://wildeaboutobesity.blogspot.co.uk/2012/05/for-new-perspective-on-c...
I agree with the argument of the report, but I do think it is unfortunate that when you present data on proportions of income from different sources, you do not separate out the proportions from taxes and from the Lottery (pages 13, 15, 18 and 30). They are importantly different. The purchase of lottery tickets is entirely voluntary, whether or not one has taxable income, their purchase is not essential to anyone's lifestyle, and people who buy them know - or ought to know - that something like half of the purchase price of tickets goes to causes that they may regard as more or less deserving. The payment of taxes is compulsory, unless one can live on income of below the personal allowance. Your second paragraph on page 13 also runs together percentages and numbers, and figures for a subset of charities and for the sector as a whole, in order to make a point. I fear that such presentation may not help to convince readers who think mathematically. It would help your case if you could publish in full the tables of data that you presumably compiled in the course of writing your report. (My apologies if they are already published somewhere.)
Charities have been on the way to becoming QUANGOs for years, I guess the process is complete now. I guess it falls to us poor, overworked, unpaid bloggers to get the truth out there.
I was disappointed to see no mention of think-tanks with charitable status in the report. Not without a hefty dollop of irony, the IEA fits into this category. Will the IEA respond to the criticism that their taxpayer subsidy in terms of tax treatment is a waste of public money and that they are a 'sock-puppet' of the state? I think an honourable response in the circumstances would be to surrender its charitable status at once - in line with the recommendations of its report.
Since you want disclosure, why not reveal the IEA's funding too? How much money do you get and from whom??
@sunny - the paper does not call for disclosure and I find it odd that you can read it and come to that conclusion. It also recognises that governments funding the work of charities might be a wholly good thing. It calls for the end to untied funding and funding for lobbying. Tied funding for projects could be directed through a not-for-profit service company if necessary. All the IEA's income is from voluntary sources so the issues are not the same. @John Doe - no irony and I am surprised at the comment given the recent IEA blog post in favour of abolishing charitable status. The paper was simply about another issue and did not address that issue for either free-market leaning think-tanks or left-leaning think-tanks. Tax relief is a different issue for two reasons. It is not discriminatory in terms of the government's view of what is and is not a good cause: tax relief follows the wishes of the donor. Secondly, tax relief recognises the reality that somebody has given up that income and it is therefore no longer part of the income that should be taxed. If I work for an extra afternoon and give the money to Cafod, I no longer have the money so I do not pay tax on it (just as I don't pay tax on it if I don't work and don't give the money to Cafod). There are certainly rational arguments against tax relief, they have been aired on this blog recently, but they are different arguments. There is a difference between tax relied in general for all charities on the same basis and government grants to particular charities for particular purposes.
The IEA a 'sock-puppet of the state'? One of the funniest comments I've read in a long time so I just must comment (I'm a strictly confirmed lurker normally). I take it the commenter has never read any IEA material which, almost without exception recently, condemns the state and calls for far less of it. This report is no different, recommending less government (state) and condemning the state for legislation which has been damaging to charities and the public at large.
One day, the left will realise that straw men and tu quoque arguments are not very effective.
Chris, A suggestion for you. In December 2009 I wrote to Nick Hurd, whilst he was shadow charities minister, with the following suggestion: ------------------------------------------------- Could I suggest a rule of thirds? The Charity Commission should insist on the use of some designation such as "Government sponsored body" for any organisation that accepts more than one third of its income from government sources of all kinds but still wishes to be treated as a charity. Once a body exceeds two thirds of its income from government sources it should cease to be a charity and should formally become an agency of the relevant department. It could then be monitored by the NAO and use a .gov.uk web address, etc. Then we would all know what we are dealing with. To re-iterate: - You could call yourself a charity as long as less than one third of your income came from the state. - Above one third you could still be regulated as a charity but you would not be allowed to use the word charity when describing yourself and would have to use a designation such as “Government sponsored body”. - Above two thirds just call yourself what you are – a part of the government. ----------------------------------------------- Nick Hurd called the suggestion "interesting" but clearly hasn't made much progress with it.
Of course, only organisations on the left and demanding bigger government are sock puppets with murky or potentially questionable funding sources, oh yes, and no mistake. CHINNY RECKON!
Hatstand: Nice tu quoque. Good grief.
I think that a practice that is more insidious is when public bodies employ people to lobby law-makers. Thus we have seen public regulators, for example, advertise for people to do jobs such as keeping the United Kingdom Parliament informed as to how well the particular public organisation is doing. It seems to me to be a perversion of the democratic process, let alone misuse of public funds, to be having public bodies employ people whose job includes telling parliaments and indeed government how wonderful the self-same organisation is.

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