My Lords, I too welcome the report of the Select Committee on Charities and pay tribute to the exceptional work done by my noble friend Lady Pitkeathley and her fellow committee members. I draw the attention of the House to my entries in the register of interests as a trustee of a number of charities, notably the Esmée Fairbairn Foundation, which provided both written and oral evidence to the committee.
What are charities for? They are,
“the eyes, ears and conscience of society”,
begins the report, as quoted by my noble friend Lady Pitkeathley. It goes on:
“They mobilise, they provide, they inspire, they advocate and they unite”.
To that, I suggest is added, “and they innovate”. In the striking written evidence from the Welsh charity People and Work, there is a passage that reads:
“During the twentieth century charities adapted as the State took on many of their traditional roles. As the State … moves away from non-statutory interventions, charities will need to change again but it would be wrong for them to just pick up what the State is walking away from, even if they had the resources to do so. The challenge, and opportunity, is to do things differently and better”.
This has been a persistent theme of Bill Gates ever since he established the Bill and Melinda Gates Foundation in interviews and speeches, in both the US and the UK. In a recent speech in Washington, he said that philanthropy cannot be a substitute for the Government in achieving wider societal improvements. Philanthropy depends on research and innovation in seeking solutions for societal problems, but it is the Government’s role to work for an overall better society. If that is true from the perspective of one of the largest grant-making foundations in the world, how much truer is it for smaller institutions? It should therefore be a critical principle for charities to adhere to but even more important that the Government should recognise it rather than, as they have done too often in the past, seeing philanthropy and charity as convenient substitutes for their own obligations.
I shall pick up on just two points from the wealth of important analysis in the report. The recommendation of independent evaluation would have to be implemented with due regard to the size of the organisations concerned and their capability of delivering this. Even the largest and best-resourced charities are challenged to make an effective assessment of impact. Indeed, I was struck by reference in the evidence to the “paradox of outcomes” put forward by Dr Toby Lowe of Newcastle University, who suggested:
“the more we measure, the less we understand”.
In looking at grant-making, I have often seen a parallel with the famous dictum of Lord Leverhulme: “Half the money I spend on advertising is wasted; the problem is I don’t know which half”. Impact evaluation is and may well remain an impressionistic part, not a precise science. We should therefore not have unrealistic expectations of what can be achieved or, hence, place unreasonable burdens on charities in reporting on it.
The other point that I wish to raise relates to social investment. Although this has not been much discussed today, your Lordships’ House considered the issue of social investment during the passage of the Charities (Protection and Social Investment) Act 2015, and the report has added significantly to the analysis of the potential for social investment. Social investment, in whatever form, requires the recipient to have prospects of generating revenue that allows the investments to be repaid or realised. As Andrew O’Brien of the Charity Finance Group commented, the “vast majority of the” charity,
“sector is working in areas of market failure … so the idea that you can commercialise those services and try to generate a surplus that could pay an investor is in most cases quite limited”.
I believe that this analysis is more compelling than, for instance, the evidence from Investing for Good that the potential scale of social finance compared to grants was much larger. In comparison, according to Richard Jenkins of the Association of Charitable Foundations, grants,
“are almost unique in their currency”,
“can do things that other forms of funding cannot. It offers flexibility and a bit of freedom for innovation”.
I do not wish to imply that the development of social investment is unwelcome; indeed, it should be further encouraged, but care must be taken to ensure that this is not at the expense of donations and grants to charities, on which their day-to-day operations depend. Nor should be further development of social impact bonds based on payments by results lead to government funding of public services at unnecessarily high cost, with inadequate transfer of risk relative to the payments made—a case of PFI syndrome.
I end by strongly supporting other noble Lords in advocating that the recommendations of the noble Lord, Lord Hodgson, should be adopted by the Government.