David Craig: Time for cuts to put brakes on the charity gravy train

Charities in England and Wales raise and spend about £58.65bn a year. Of this, around £51.94bn (88 per cent) is used for what the Charity Commission (the regulator for charities in England and Wales) classes as “charitable expenditure”.

David Craig.

At first sight, this looks impressive. But once you start digging a little deeper, the picture is not quite so rosy.

There are an almost unbelievable 180,281 registered charities in England and Wales. The population of England and Wales is around 56,600,000, so there is a charity for every 310 people.

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These charities employ 874,829 people in addition to the 1,444,317 volunteers who help support them. The average cost of each employee (salary, NI and pension) is around £26,000 a year. This means that £23bn of the £58.65bn we give to charities is spent on staff costs.

Some of these staff may be doing useful charitable things like caring for children, answering helplines or conducting cancer research. But many of them will just be administrators, managers on high five-figure salaries and executives on comfortable six-figure salaries – as the recent exposé into the pay of overseas aid charities has revealed to the discomfort of those who support these organisations with their hard-earned money.

Perhaps surprisingly, the Charity Commission allows charities to include staff costs under “charitable expenditure”.

There are also 945,278 charity trustees. In theory, these trustees should not be paid. But some are and all can claim for their time and expenses. If we assume they claim on average just £500 per year each, that’s another £472m of our donations to charities going into the management of these 180,281 charities rather than into charitable work.

Each year, every charity has to provide a set of accounts and a report to the Charity Commission. If we assume this costs only £1,000 per charity, there’s another £180m used for administration. Moreover, it would be safe to assume that in the largest 30,327 charities – those that raise and spend more than £100,000 a year – top executives and managers will have expense accounts.

If each of these larger charities spent only £2,000 a year on such expenses – the head of Oxfam spent £48,000 on expenses in just one year – there’s £60m more of our money that cannot be used for charitable purposes.

So, if we look again at some figures. Each year £58.65bn a year is collected and spent by charities. Of this, about £6.71bn (11 per cent) goes on governance and fund-raising and a further estimated £23bn (39 per cent) goes on staff costs. In summary, about half of all the money we give to British-registered charities is spent by them on themselves, leaving just half for real, clearly identifiable charitable expenditure.

This is a very different picture to that painted by the Charity Commission which boasts that more than 88 per cent of all donated money goes on “charitable expenditure”.

These figures might give us good reason to wonder whether we really need 180,281 charities or whether 10,000 to 15,000 might actually massively reduce duplication of work effort and give us a much more efficient, streamlined and focused charities sector.

A significant reduction in the number of charities could also lead to a cut in the number of staff working for these charities from the current 874,829 to perhaps 250,000 and a reduction in the number of trustees from 945,278 to maybe 50,000 at most.

Making these cuts would release at least £15bn a year more for real charitable expenditure – and help those Yorkshire voluntary organisations which are being forced to meet growing demand with scarcer resources and fewer staff as a result of council cuts.

As other parts of the economy are being forced into cutting their costs and doing more with less, it may now be time to ask whether our charity sector could be run more efficiently and more effectively with fewer charities, fewer employees, fewer trustees and more of our money going to real charity work rather than being spent on the running of our 180,281 charities.

This is why it is time now to expose some large charities for what they are – just well-paid well-pensioned quangos for political hangers-on.

* David Craig is the author of Greed Unlimited: How Cameron and Clegg protect the elites while squeezing the rest of us.