Why should banks profit from beleaguered charities?

The Prime Minister should feel most welcome to nationalise Reprieve, and pour a few millions into our work. 

While it is generally considered unacceptable to kick a dog when it is down, most people in the current climate agree that an exception should be found for bankers, who are still begging for a good swing of the right boot.

My current gripe involves charitable funding. Charities are facing a difficult year. Since many deliver services to those in need, and the number of needy inevitably rises during economic hard times, it was predictable that during the last recession nine-out-of-ten charities experienced an increase in demand, while two thirds saw individual donations decline. We are set for a repeat, only worse.

Few people will have missed the fact that £120 million in charitable revenue evaporated in the Icelandic hot springs earlier this year. There may have been limited sympathy for the Cat’s Protection League, which had squirreled away an incredible £11.2 million in Kaupthing Singer & Friedlander (KSF). However, of the other 98 charities identified with deposits in Iceland, most had much less to lose.

The charity where I work, Reprieve, was not into offshore banking. What funds we do have we hold in trust to ensure that prisoners get a fair shake, whether they are on death row or in gulags like Guantánamo Bay. While we always run on a tenuous budget, and have not raised as much in our entire history as the CPL lost in KSF, we try to be ensure that we have three or four months’ of expenditure in the bank. This used to be considered responsible, before we learned the extent to which everyone’s bank manager was squandering our resources on his annual bonus.

There is something deeply disturbing about the notion that a bank can take a charity’s money, and then effectively embezzle it -- not have the funds, or pay premiums on sufficient insurance, to guarantee that the charity can get its money to do its job.

When it became clear that no bank was safe, we considered our options. Charities only enjoyed protection for up to £50,000 in each bank, the same as individuals. While somewhat put off by the notion that our funds might contribute to the advertising on the Newcastle United strip, we decided to put it in the nationalised Northern Rock. But the Rock refused to take our deposit. They had unilaterally decided to make the world less safe for the prisoners’ money.

Our real argument is not with the Rock’s owners. The Government subsequently guaranteed accounts in charities with an annual turnover of up to £6.5 million. Yet, this was effectively spending our tax money to underwrite the insurance that the banks were unwilling to provide. As ever, the problem remained with the banks.

And there are other issues as well. The various non-profits put their funds in Iceland because KSF offered the best charity deals. Most British banks draw their inspiration from Scrooge, and refuse to even allow free charitable accounts. Some (HSBC and NatWest) only waive fees if the charity’s turnover is less than £100,000. Lloyds TSB sets the limit at £50,000. It is difficult to get much done with such a budget – on that sum, we’d probably be limited to one staff member who could not afford an office, let alone the flight to Guantánamo.

Yet other banks (such as Barclays) outdo their colleagues in parsimony, and offer no special services for small charities at all. In other words, they want to make a full profit off any beleaguered charity worker who walks in the door. When asked to justify this, Barclays proffered a defence that provoked a degree of scepticism – their charitable wing already does enough. It must be said that the name “Barclays” does not rank high on the list of Reprieve’s donors.

The Government is the most powerful teacher, either for good or for ill. During hard times the Government should lend more support to charities that are working directly for those in need, rather than focusing our tax billions so resolutely on the plight of bankers. (The Prime Minister should feel most welcome to nationalise Reprieve, and pour a few millions into our work. Perhaps the slogan could be, “Charity begins at the Home Office.”)

But it seems clear that the banks still lack for lessons. Taking our donors’ money in banking fees is simply wrong. Pending our nationalisation, the Government’s mandatory code of conduct should prevent a banker from making a profit out of non-profits.

This article also appeared in the New Statesman.