The never never?
February 2009
When business secretary Peter Mandelson unveiled the £20bn package of measures designed to address the cash flow, credit and investment needs of small and medium enterprises...
...he clarified that the package was open to ‘all businesses, including the third sector’. Stephen Bubb observed in the Times at the end of last year: ‘If the Government is serious about helping people through the recession, it needs to help charities now… we look forward to a serious, substantive support package.’
I’m not convinced this loan guarantee scheme is quite the right sort of support in isolation, despite the efforts that have been made to secure confirmation of the sector’s eligibility to it.
North of the border, Scottish Review editor Kenneth Roy clarified: ‘Until fairly recently, if you had cash flow problems, you applied for an overdraft (a different thing from a loan and for different purposes) or your business went bust. Now it seems, the government sees it as its legitimate role to guarantee you against your own failure.’ Blunt though this is, I have this uncomfortable feeling he’s got a point. Put simply, a short-term problem is solvable by bridging finance (for example while waiting for a committed grant to be paid), but if the basic model of the charity is in trouble, should it be propped up by credit?
Charities have not, historically, been ideal lending customers for banks; if charity defaults on the loan; the bank risks unwelcome publicity when it is called in. Malcolm Hayday of Charity Bank told Caritas: ‘The evidence of recent weeks is that the commercial banks have become fairweather friends of the third sector. It is therefore worth asking whether the guaranteeing of facilities that might be a bit too plain vanilla for most enterprising charities will really unlock the help that the sector needs… On first reading the scheme does not appear to embrace all of charitable activity – nor should it for many may need core grant support not debt. The sector requires bespoke, responsible financing support, not a one size fits all solution.’
One can only hope that all the other campaigns led by sector leaders result in some more appropiate government support sooner rather than later, because being able to borrow money cannot replace basics such as a national register of unclaimed assets (see pre-budget report news story in Caritas, Issue 14, January 2009) and further work on Gift Aid and VAT recovery reform.
I am delighted to welcome Kevin Brennan and Vince Cable to the Viewpoint section of this issue (see their Viewpoint piece) and it is reassuring to know that the government will sustain its investment in the sector. However, when it comes to the viability question there is no getting away from the fact that trustees must seize control of their own sustainability.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
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