Charity Commission’s exoneration of IEA undermines its own priorities and guidance

In a recent (19 October) response to concerns I raised on 9 March about the IEA, the Commission seems to undermine its own strategic priority to encourage transparency and accountability. It also weakens its previous guidance on what it means to advance education rather than promote a particular point of view or prescription.

A wider issue is at stake: whether charitable status and privileges should be used by certain “educational” think tanks to advance specific points of view and persuade people to form specific conclusions (whether political or economic), which (as the Commission has previously made clear) do not constitute “education” for charitable purposes, whilst at the same time undermining the sector’s recommended standards of transparency and accountability.

In its treatment of the issue of transparency and accountability, a key pillar of its current strategic plan, the Commission’s letter to me does say that the Commission “commends” to all charities that they should publicly acknowledge the source of funding. The Commission says that it has made its views clear to the IEA Trustees, but that is all. They point out that there is no general law compelling disclosure of the source of donations, and the Commission would only direct Trustees to do so in exceptional cases which they judge should not include the IEA. They quote without comment the justifications offered by the IEA Trustees for not publicizing the sources of their donation income. These include that “it is essentially a private matter” (as if the public interest were not involved in charities’ tax privileges) and that most of their donors, if asked permission to name them, would refuse. Yet if Trustees can simply say “it is essentially a private matter” or “donors would be put off”, what is left of the Commission’s strategic priority to promote transparency and accountability?

This is indeed a marked contrast from what the Commission had to say on this exact subject not long ago in its guidance relating to the EU Referendum:

“If your charity does get involved in any political activity connected with the referendum, you should ensure that, during such involvement, you publicly acknowledge the source of your funding so that the reasons for your involvement can be fully assessed. If you do not do so, this could seriously undermine and detract from the quality of your contribution and may attract regulatory scrutiny by the Commission….full transparency about funding is especially important.” (My italics). Now, amidst recurrent allegations that the IEA may have been accepting money from people connected with the tobacco or food industries or being used to promote the views of particular rich donors – why no similar robust emphases or warnings?

The second point I raised in March was whether the IEA’s political activity (as defined in the Commission’s guidance CC9), such as its part in developing the case for the anti-advocacy clause that would prevent charities from using public money to influence Government, Parliament or any regulator, strayed beyond the proper limits of the advancement of education, which is the IEA’s charitable objective.

In its previous guidance on the advancement of education for the public benefit, the Commission states clearly that “Promoting a specific point of view may be a way of furthering another charitable aim, but it would not be education.” “If the purpose of providing information or education is to persuade people to form specific conclusions, then this is not education.” So is it “education” to seek to persuade Ministers and special advisers to adopt anti-advocacy clauses in all Government contracts with charities? Is IEA saying that its research and political activity here was not designed to lead to a particular conclusion? The same supplementary guidance clarifies that the charitable advancement of education involves “researching and presenting information in a neutral and balanced way that encourages awareness of different points of view where appropriate”. I defy anyone to read the IEA’s sock puppet reports and find them to be within that guidance.

In the recent letter to me, by contrast, the Commission advances a more ambiguous definition of what constitutes “education”, quotes a series of general assurances from the Trustees, and concludes that no regulatory action is appropriate. Here again, the effect is to weaken its own previous guidance. Why?

Paula Sussex’s letter of 19 October 2016 to me, and my response raising these further concerns, follow. Here are links to my original letter of March 2016 raising these two key concerns, and to my critique of the IEA’s sock puppets report:

https://andrewpurkis.wordpress.com/2016/03/22/charity-commission-to-investigate-institute-of-economic-affairs/

https://andrewpurkis.wordpress.com/2016/02/17/the-rotten-basis-for-government-anti-advocacy-policy/

Paula Sussex’s letter of 19 October 2016:

Dear Andrew
The Institute of Economic Affairs (235351) (IEA)

I am writing further to your email dated 9 March and our update of 15 July to let you know the outcome of our enquiries into the concerns you raised with us about IEA. I am sorry that we have not been able to respond fully before now, but we have been in continuing dialogue with IEA.

Transparency

In the overall context of giving the public confidence in charities, the Commission’s Strategic Plan for 2015-18 sets out our commitment to encouraging greater transparency and accountability by charities.

Whilst the Commission commends to all charities that they should publicly acknowledge the source of their funding, there is no legal requirement to do so – unless it is from a trustee or related party and has conditions attached to it that influence how the charity proceeds.

However, as you may know, the next update of the SORP framework is likely to take effect from 2019 and so in advance of this the Commission is carrying out research across the four charity law jurisdictions covered by the SORP (England and Wales, Northern Ireland, Scotland and the Republic of Ireland). From May until mid-December we are seeking views as to what changes should be made to improve the SORP and deliver information needed by the general public looking at a charity’s report and accounts. One of the topics within the charity regulators’ list of research topics that we are seeking view on is who funds a charity and whether this should be disclosed in the accounts.

If you would like to comment, the closing date is 11 December (Email to charities.sorp@cipfa.org). The consultation paper can be found at:

http://www.charitysorp.org/media/642814/charities-sorp-consultation-paperv4.pdf

If agreement on disclosure was agreed, the earliest we would see the results is late 2020 when 2019 accounts are filed.

Therefore, in the absence of any legal requirement to disclose, we would only consider requiring the trustees to disclose details of their sources of income in the context of individual cases. In doing so, we would take into account risk and the nature of our concerns. Where, for instance, the funding was inappropriately influencing the way that a charity operates, we might well have grounds for requiring disclosure about its sources of funding.

Nevertheless, we do consider that a charity should be transparent and accountable to their stakeholders. This means providing them with relevant and reliable information in a way that is free from bias, comparable, understandable and focused on stakeholders’ legitimate needs. This, therefore, should be the starting point. However there will be individual factors to consider in each case, including the provisions of the Data Protection Act 1998 and the wishes of donors. The decision is for the trustees to make – except in exceptional circumstances the Commission cannot direct the trustees to reveal the source of their funding.

IEA has explained that it does not place a record of the source of its donation income in the public domain for three reasons:

 the trustees judge that to disclose the identity of a donor would require their permission, and that this permission would be unlikely to be forthcoming in the majority of cases;

 the charity regards donations to charities as essentially a private matter; and

 the charity tells us that it is regularly attacked by individuals and organisations (including personal attacks) who disagree with its research output.

It says that it would take a different approach if it received public funding.

We have made our views known to IEA and will reiterate them when we send our closing letter. However, we have no grounds to insist on disclosure of donors and we do not consider that it would be appropriate for us to take regulatory action against the charity in respect of its decision not to identify the source of donations.

Whether in respect of specific and contentious campaigning and lobbying activity the IEA has been acting properly within its charitable objects.

Although you say that a charity cannot promote a particular view of economics, the position is actually more nuanced than that statement implies. As an educational charity, IEA’s work overall must present an educational, and not propagandist, perspective. Its purposes can be pursued as a legitimate and recognised (that is non-controversial) branch or aspect of the learning of economic or political science. This learning may have a particular perspective which might border on, or be seen as, consistent with a political perspective. Provided the perspective can properly be regarded as a legitimate aspect of learning in the subject matter, this may be acceptable, as would an approach to the subject from a free market economy perspective. There is also no legal rule that a
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charity of this kind (provided it is approaching its work within the rigours required of an educational charity) cannot be involved in subjects which are controversial in this sense.

From our own research, we have not found any evidence to suggest that IEA has compromised its independence and neutrality such that it would conflict with our guidance on political activity and campaigning1.

IEA is very strongly of the view that it is independent of all political parties and this is borne out by what IEA says about fulfilling its objectives on the ‘About us’ page of its website2.

The trustees have explained that IEA takes opportunities to impact public debate through reaching policymakers, opinion-formers and the wider public and that placing economic research in the public domain furthers IEA’s educational objectives and, as part of that work, it occasionally meet politicians and their advisors. Its programme of activities is designed entirely and exclusively to meet IEA’s charitable objectives.

The trustees are very clear that IEA is not and never has been a campaigning organisation and do not have an agenda beyond research into the economics of markets in which individuals can make free choices, and the dissemination of ideas thereby generated.

The trustees have also explained that IEA does not accept commissioned research projects from corporations. Its publications programme and its content is set by IEA staff under the general direction of its trustees. While IEA does accept direct funding for research from individuals and charitable foundations for research papers, these are typically acknowledged in the publication. Any corporations who donate funds to the IEA to support its work are not asked to comment on its research and no company is able to guide IEA’s research conclusions.

The trustees have assured us that individuals, foundations and companies donate money to the IEA for their own reasons and IEA’s role is to ensure that it is “blind” to these reasons and to only use funds these to support its charitable objectives. The trustees have told us that the trustees take considerable efforts to ensure that whatever the source of funding, IEA’s research is independent.

The trustees have explained that if IEA comments on political policies, it would only be in the circumstances where such a policy aligned with its charitable objectives. The trustees have been clear that IEA neither engages in policy engineering, does not engage in campaigning nor does it accept Government grants or accept commissioned research from Government.

1 Speaking out: guidance on campaigning and political activity by charities (CC9)

2 “The IEA is an educational charity (No CC 235351) and independent research institute limited by guarantee. Ideas and policies produced by the Institute are freely available from our website for any individual or organisation to adopt, but we do not “sell” policy. The Institute is entirely independent of any political party or group, and is entirely funded by voluntary donations from individuals, companies and foundations who want to support its work, plus income from book sales and conferences. It does no contract work and accepts no money from government.”

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The only sponsored research IEA accepts is from individuals or trusts who do not have a vested commercial interest in the topic under discussion. The sponsorship only goes as far as suggesting topics, not the contents of the paper or other research output. Most of IEA’s research is commissioned independently by its Academic and Research Director on the advice of IEA’s Academic AdvisndrewAory Council, whose members are listed on its website under ‘Advisory Council’ and most of its publications are peer-reviewed.

In the light of this we are of the view that there is no appropriate regulatory action for the Commission to take on this issue.

I hope this is helpful to you. Please do not hesitate to contact either of my colleagues, Neil Robertson or Anthony Blake if you would like to explore any aspect further.

Yours sincerely

Paula Sussex Chief Executive

Andrew Purkis’ Reply to Paula Sussex, 31 October 2016:

Dear Paula,

The Institute of Economic Affairs (235351)(IEA)

Thank you for your letter of 19 October, and for the continuing dialogue that you have conducted with the IEA as a result of my original letter of 9 March.

I understand why the Commission is reluctant to take regulatory action or substitute its own views when the Trustees of a charity take decisions in good faith about how best to pursue their charitable objectives. It is no good trying to exceed the powers allowed to the Commission by Parliament and the courts.

Within that framework, however, it seems desirable for the Commission to be consistent in the strategic direction, substance and strength of its guidance on important issues.

The first issue raised in my letter was about transparency and accountability which, as you say, the Commission has rightly made one of its core strategic aims. In your letter you say that the Commission “commends” to all charities that they should publicly acknowledge the source of their funding. You make clear that you have made the Commission’s views known to the IEA but nevertheless do not feel able to do or say publicly anything more about the IEA Trustees’ frequent refusal to identify where their money comes from. This gives rise to three concerns:

  • This seems a considerably weaker positioning and tone from the guidance to charities contemplating involvement in the EU Referendum campaign, when the legal constraints on your ability to act were just the same as they are now. In that guidance, you said: “If your charity does get involved in any political activity connected with the referendum, you should ensure that, during such involvement, you publicly acknowledge the source of your funding so that the reasons for your involvement can be fully assessed. If you do not do so, this could seriously undermine and detract from the quality of your contribution and may attract regulatory scrutiny by the Commission….full transparency about funding is especially important.” (My italics). Yet no similar warnings are articulated in your letter about the un-transparent funding of the IEA’s contentious political activity. This can and does give rise to damaging public perceptions (whatever the intentions of the Trustees) that charitable status is being used to advance interests connected with the tobacco or food industries or the views of particular rich donors.
  • You quote three reasons that the IEA trustees give for not publicising the sources of their donation income. They are that, if asked for permission to disclose their identity, most of their donors would refuse; that “the charity regards donations to charities as essentially a private matter”; and that the charity is regularly attacked by those who disagree with its research output. You give no indication as to whether or not the Commission regards these as justified reasons. Yet if the trustees of any charity can say “it is essentially a private matter!” or “our donors would stop funding us!”, without any public counter-argument from the Commission, your strategic aim of transparency is surely undermined?
  • You quote the Trustees as saying that “Individuals, foundations and companies donate money to the IEA for their own reasons and IEA’s role is to ensure that it is “blind” to these reasons and to only use these funds to support its charitable objectives”, but you do not take the opportunity to point out that this view is problematic for public confidence in charity. It is part of the duty of Trustees to be alert, rather than blind, to the motives behind substantial donations and to the very damaging perceptions that can arise if independence is perceived to be compromised.

In these three ways, your letter seems unfortunately to weaken the Commission’s previous strategic determination on the subject of transparency and accountability.

 

The second issue in my letter concerned the nature of the advancement of education as a charitable objective. Has the IEA’s political activity (as defined in CC9) strayed outside it? Here again, I believe your letter advances a less robust position than previous Commission guidance. You now say that it is enough if the contribution is not “propagandist”, if it is a legitimate and recognised branch or aspect of the learning of economic or political science, and if, albeit from a particular perspective, the work is “within the rigours” of an educational charity. On the basis of this, plus some assurances from the trustees that appear to be taken on trust, you decide that there is no appropriate regulatory action to be taken. Surprisingly, you do not offer any analysis of, or even mention, the specific example raised in my letter of the part IEA played in the birth and development of the anti-advocacy clause affecting charities in receipt of Government funds.

Yet the Commission’s supplementary guidance on the advancement of education for the public benefit states clearly that “Promoting a specific point of view may be a way of furthering another charitable aim, but it would not be education.” “If the purpose of providing information or education is to persuade people to form specific conclusions, then this is not education.” So is it “education” to seek to persuade Ministers and special advisers to adopt anti-advocacy clauses in all Government contracts with charities? Is IEA saying that its political activity here was not designed to lead to a particular conclusion? The same supplementary guidance clarifies that the charitable advancement of education involves “researching and presenting information in a neutral and balanced way that encourages awareness of different points of view where appropriate”. I defy anyone to read the IEA’s sock puppet reports and find them to be within that guidance.

This issue runs deep. It concerns whether charitable status and privileges should be used by “educational” think tanks to advance specific points of view and prescriptions (whether political or economic) under the pretence that they are not promoting a specific point of view and not persuading people to form specific conclusions, whilst at the same time undermining the Commission’s important strategic aims regarding transparency and accountability. I urge the Commission to grasp this nettle. I am afraid your letter tries to avoid a clearer resolution of this issue by introducing greater ambiguity and less precision than your previous guidance.

Thank you for any consideration that you feel able to give to these further concerns.

Yours sincerely,

Andrew.

 

 

 

 

 

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