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The Charities Bill
Whither Grant Making Trusts?
The enormously generous Lord Sainsbury of Preston Candover looks set to win an amendment to the Charities Bill allowing living settlors of charitable trusts a degree of anonymity in their grant giving, which critics say will set the clock back several years. Meanwhile, the equally generous Lord Sainsbury of Turville, his cousin, has recently declared that he intends to give his entire fortune away in his lifetime, including the very considerable capital in his trust, the Gatsby Foundation.
These statements represent to some extent the opposite sides of a long running debate about grant making trusts and how much they should tell us about their activities. It is an argument of full disclosure and accountability versus the ability to keep charitable giving as a personal, private matter; of openness versus secretiveness; of control versus discretion. Lord Sainsbury of Preston Candover argues, not so much for himself as for others, that the burden of disclosure is now stopping people from establishing trusts, and there is considerable evidence to support this. Lord Sainsbury of Turville, however, seems not to mind the current burden of disclosure and accountability and perhaps even relishes it as he tells his intentions to the world.
The debate became more of a campaign in the 1990s. The two sides could be classed as the proactive "Regulators" on one hand, and the reactive "Grateful" on the other. The Regulators argue for complete disclosure of all grant giving by charitable trusts, since charities are public bodies that require their trustees to account fully for their investment and distribution policies. The Regulators complain that too many trusts are "arrogant" and "secretive". The Regulators scrutinise accounts looking for misdemeanours and cite examples such as the trust that spends excessive amounts on wine for Trustees' dinners; the family trust which buys tickets for family and friends to attend expensive fundraising events; the family member trust director who is paid an inflated salary; or favouring family members when appointing professional advisers, giving them houses or paying their excessive consultancy bills.
The Grateful argue that if individuals are generous enough to establish a trust in order to give away a proportion of their wealth this is entirely a matter between them, the Inland Revenue (or Revenue and Customs, HMRC, as we should now call them) and the Charity Commission; where they give their money is none of our business. They argue that the trust of a living settlor is really the vehicle for his personal giving, and that his generosity so far outstrips any minor infringements of the rules that it is churlish to pursue him. They consider that administrative misdemeanours very seldom amount to more than a tiny proportion of the overall distribution; they also remind us that the tax saving, the part of the funding that particularly puts it in the public domain, is only a small proportion of the total amount given. The Grateful argue that if the HMRC and Charity Commission's regulatory processes are not working then it is those two bodies we should be pursuing, not the trusts – these bodies should ensure that trusts comply with their reporting requirements. Against a backdrop of falling trust registrations they argue that we should actively encourage, not discourage, wealthy people to set up trusts, and keep criticism in proportion.
The very real misdemeanours of a tiny number of trusts have strengthened the Regulators' hand, especially in the current climate of ever tighter regulation in all areas of life. They have been winning the arguments over the last ten years. Throughout the 1990s the campaign tightened its focus on a few perceived miscreant trusts, and even got personal with some, until those targeted did one of two things - they either became "good citizens" and started telling us who they were giving the money to, and what policies they pursued; or they evaded the issue by changing the names of the trusts or even closing them down. The latter caused some very sad losses, when the families concerned, feeling that their generosity was being negated and belittled, found more private ways of giving. Who won? Well of course the Regulators won and continue to win. There are undoubted benefits in a more open approach to trusts' policy and giving.
But there has been a real cost which we may well come to regret twenty years from now, when we find that a generation of potential endowed trusts is missing from the fundraising mix.
We cannot just blame the campaign for regulation and disclosure for the substantial drop in new trusts registered in the last five years. Gift Aid has provided the wealthy with a perfect way of making very substantial donations with virtually no disclosure requirement. But the establishment of a trust is also a demonstration of a commitment to giving, rather than a one off occurrence. The Regulators believe that Gift Aid should be the chosen method of giving by those who do not wish to submit to the rigours of Trust reporting requirements. The Grateful would say that every potential endowed trust which is lost is another guaranteed flow of future giving lost.
So, to return to Lord Sainsbury of Preston Candover, it looks as though the Grateful may after all gain a small victory when his amendment to the Charities Bill goes back to parliament because it undoubtedly will have a sympathetic – and Grateful – audience there. But the underlying conclusion may stick in the Regulators' craw – the idea that one section of society should rely on benefit given voluntarily by another rather than receive it as of right. For the logical end to their argument is a world where there is no place for the Grateful at all. Pause a moment to think about this. Perhaps it behoves all of us, before we write our next grant proposal to a trust, to ask ourselves "Who am I – Regulator or Grateful?"
For further views on whether trusts should disclose their grants see the debate on the Directory of Social Change website, which includes a contribution by Andrew de Mille see www.dsc.org.uk/charityexchange/july05_debate.html
Andrew de Mille is a Partner in Andrew de Mille Fundraising Consultants, a founder, former Chairman, and current Board Member of the Association of Fundraising Consultants. Tel 01628 527753 email andrew@demille.co.uk
(September 2005)