What does the Government’s new clause on grant funding mean for charities?

The implementation of the Lobbying Act in 2014 created a climate of uncertainty, leaving charities unsure about the legitimacy of their activities. The effect was charities refraining from campaigning in case they were seen to be acting improperly, severely curtailing the advocacy function that civil society organisations play so vitally in a democratic society.


Sadly, it seems that the Government is pursuing new action that will lead to a similar outcome.


This time, the Government’s target is grant funding. An announcement from Cabinet Office Minister Matthew Hancock on Saturday morning declared that organisations in receipt of grant money from government would no longer be able to use grant funding to try and influence government and politicians. This, as he readily admitted, derives from a report by the Institute of Economic Affairs into “sock-puppets.” You can read the thoughts of my colleague Rhodri Davies on their report here.


Here is the new clause that the Minister is introducing:


“The following costs are not Eligible Expenditure: Payments that support activity intended to influence or attempt to influence Parliament, government or political parties, or attempting to influence the awarding or renewal of contracts and grants, or attempting to influence legislative or regulatory action.”


This has been accompanied by interim guidance, which you can see here. There are significant concerns about whether this new clause is either necessary, or workable.


First of all, organisations giving grants (including government) are already able to state the purposes for which a grant is given. This grant is then known as restricted income, and means that recipient charities have to account for the spending of that money in their accounts as set out by SORP. Does government already use the powers associated with restricted grants? Let’s turn to Lord Bridges of Headley, Parliamentary Secretary for the Cabinet Office. Responding to a question in the House of Lords on Wednesday, he stated that:
“I point out that for a number of years government departments have included a provision that taxpayers’ money should not be used for political activity and this new clause simply clarifies what that means.”


It seems, therefore, that the Government is creating a solution for a problem that they do not think exists. Unfortunately the new clause is more than a clarification. It is detrimental because whereas in the past charities in receipt of unrestricted grant funding were able to engage with government and politicians, the implication now is that such engagement is automatically seen to be improper.


How would it work in practice? At this stage, pass. Here are some scenarios that the new clause might impact:


  • An MP meets a local charity to talk about their work, and asks about a project funded by a grant. Can the charity answer, or is that influencing? What if the MP wants to take a photo and send out a press release that references the project? And if the MP wants to make representations on that charities behalf, can staff at the charity provide them with information without breaching the new clause?


  • A charity receiving a government grant to run a programme uncovers an easily remediable situation that would help the Government, taxpayers and their own beneficiaries. Whilst the new clause seems to ban them from telling government (no influencing legislative or regulatory action, remember), can they tell anyone else? Is this good government practice?


  • A charity carries out an evaluation as part of a projected funded by a government grant, which shows they were extremely successful. Can they report that to government (the funder), or does that constitute activity that attempts to influence the awarding or renewal of contracts and grants?


  • A charity is called to give evidence about a grant funded project by a select committee. Given that they cannot influence Parliament, government or political parties, what do they do?



The Minister for Civil Society (Rob Wilson MP) has dismissed fears of charities being unable to report issues as “complete nonsense.” It’s perhaps less easy for charities to take such an approach, with the knowledge that any action which the Government deems to fall foul of the new clause could see their funding revoked.


The guidance states that departments are able to remove the clause, or make qualifications, with explicit agreement from ministers. Exemptions must be clearly outlined in the grant agreement. It is suggested that qualifications could include where a grant is used to fund research, and artistic activities that challenge government get special dispensation for some reason.


So, art that challenges the Government is fine. A charity finding a flaw in the law that hits taxpayers and beneficiaries and reporting that to government is not. Got that?


Even though the new clause seems to be unworkable in practice, that alone won’t step it being introduced. (The Minister is able to vary this guidance without being subject to Parliament scrutiny.) Of course, the real problem is the effect that the uncertainty that it will cause for charities, which takes us back to the Lobbying Act.
Where charities once campaigned with confidence, now they tread nervously. Where charities once worked positively with government to change lives, they now find their ability to make representations curtailed subject to the different interpretations of the guidance, and the whims of the ministers at each department.


Crucially, both measures – and the negative connotations associated with anything seen to be a “breach” – will mean more charities erring on the side of caution, unwilling to do anything that they fear may be in contravention of the rules. Who gets hit hardest? The beneficiaries, the vulnerable people who rely on charities to speak up on their behalf and be their voice.


We think that the impact of this new clause is much more severe that the Government and MPs have perhaps realised, and we strongly urge them to think again.

Steve Clapperton

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