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How much government aid does a charity like Oxfam actually get?

The international development secretary has warned the government could cut Oxfam’s funding as a response to a scandal in Haiti. 

Generally, charities enjoy a lot of trust. In fact, at the end of last year, they were the fifth most trusted public institution, after the NHS, armed forces, police, and schools. But public confidence has wavered in recent years, in part down to distrust about how charities spend donations and a lack of knowledge about where donations go.

The recent allegations against Oxfam and its staff will do nothing to help that public trust, and will only serve to open up more scrutiny on the sector. Last Friday, The Times reported that a number of aid workers were sacked or allowed to resign in 2011 after an internal inquiry into alleged sexual exploitation. According to the leaked report, one of the men, Roland van Hauwermeiren, admitted to using prostitutes in Haiti, during post-earthquake relief efforts. The revelations have triggered a public debate about the conduct of aid workers, and how exactly charities should be monitored and funded. 

Unlike profit-making companies, which may suffer from a bad reputation and still rake in cash (arms dealers, anyone?) charities rely on their reputations to attract funding and donations. Now, Oxfam’s looks in jeopardy. International development secretary Penny Mordaunt reiterated her warning that the government could cut Oxfam’s funding as a response to the scandal. But what would that mean for the charity’s future?

As is frequently complained about by the Jacob Rees Moggs of this world, the government spends 0.7 per cent of its national income on foreign aid. That equates to £13.4bn. The UK first hit this target in 2013 and enshrined the spending requirement in law two years later.

Foreign aid money is either earmarked for specific projects and goes directly to the country involved or is pooled into larger budgets of multilateral organisations like the European Commission. Last year, the top recipients of bilateral aid were Pakistan, Syria and Ethiopia.

Only a tiny amount of Department for International Development’s overall international aid budget is given straight to Oxfam – the charity doesn’t even make it in on the list of top 20 recipients of multilateral aid. Last year DFid gave £31.7m to the charity, less than a quarter of a percent of its overall foreign aid budget. So from the government’s perspective, just a drop in the ocean.

But if Mordaunt were to carry out her threat and cut all of Oxfam’s government funding, what effect would that have on the charity? 

Well... Oxfam would definitely notice. Of its £409m income last year, 7 per cent came from the UK government. That's in comparison to donations and legacies which accounted for 26 per cent of funding and trading sales which make up just over a fifth.

The charity itself spends about three quarters on charitable activities, and a quarter on wages and running costs. Last year, it spent £303.5m on charitable activities, mainly involving humanitarian response work and development work. A tiny fraction was spent on campaigning. The countries that benefited the most included Yemen, Nepal, South Sudan, Ethiopia, Jordan, Democratic Republic of Congo, and Iraq.

While Oxfam gives reasonably detailed explanations of its work in each country it aids, it doesn’t publicly account for every penny spent in frontline operations (after all, which organisation does make such intricate details public?) It’s no surprise that it's here where things get less transparent.

In the wider sector, concerns have been raised about money being spent in countries known for corruption, but there are no good estimates as to how much money is lost because of this. Anecdotal evidence also suggests efforts to protect budgets can also make things worse. While donors may have good intentions to spend their money wisely, bureaucratic spending rules can end up delaying urgent projects on the ground. Most employees who receive salaries don’t expect to have to account for how they spend it to their boss. Aid workers, too, receive salaries – but in disaster areas, their comparative wealth may give them a clout that few ordinary employees enjoy. 

Transparency and trust-building can take many forms. The solution to the Oxfam scandal is unlikely to lie in forensic accounting alone. Instead, the answer may be better character vetting for aid workers and closer information sharing between organisations in the sector. After all, the charity that subsequently employed van Hauwermeiren said it was never told of the allegations. In the case of the Oxfam aid workers in Haiti, for all the focus on the charity’s funds, the scandal has focused on the behaviour of the workers and how they allegedly abused the legitimate structures of aid relief. 

An examination of the huge power imbalance between rich Western aid workers and those in urgent need could also help the sector answer questions about why this has happened. This could lead to more tangible solutions and safeguards like whistleblower networks or “humanitarian passports” that detail an aid workers’ previous conduct. Oxfam itself has said that it will look carefully at how it recruits and manages its aid workers, especially in situations where the urgent need for aid may increase pressure to find frontline workers. It has also introduced a new code of conduct since 2011 which stipulates: “I will also not exchange money, offers of employment, employment, goods or services for sex or sexual favours.”

While on the face of it, giving money to charity should be fairly easy for a government to defend, in practice it actually requires having quite a sophisticated conversation about the realities of charity funding. It is yet to be seen whether Oxfam’s turmoil will produce such discussions within government, or only further entrench the current ideological divides.

 

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Labour’s renationalisation plans look nothing like the 1970s

The Corbynistas are examining models such as Robin Hood Energy in Nottingham, Oldham credit union and John Lewis. 

A community energy company in Nottingham, a credit union in Oldham and, yes, Britain's most popular purveyor of wine coolers. No, this is not another diatribe about about consumer rip-offs. Quite the opposite – this esoteric range of innovative companies represent just a few of those which have come to the attention of the Labour leadership as they plot how to turn the abstract of one of their most popular ideas into a living, neo-liberal-shattering reality.

I am talking about nationalisation – or, more broadly, public ownership, which was the subject of a special conference this month staged by a Labour Party which has pledged to take back control of energy, water, rail and mail.

The form of nationalisation being talked about today at the top of the Labour Party looks very different to the model of state-owned and state-run services that existed in the 1970s, and the accompanying memories of delayed trains, leaves on the line and British rail fruitcake that was as hard as stone.

In John McDonnell and Jeremy Corbyn’s conference on "alternative models of ownership", the three firms mentioned were Robin Hood Energy in Nottingham, Oldham credit union and, of course, John Lewis. Each represents a different model of public ownership – as, of course, does the straightforward takeover of the East Coast rail line by the Labour government when National Express handed back the franchise in 2009.

Robin Hood is the first not-for-profit energy company set up a by a local authority in 70 years. It was created by Nottingham city council and counts Corbyn himself among its customers. It embodies the "municipal socialism" which innovative local politicians are delivering in an age of austerity and its tariffs delivers annual bills of £1,000 or slightly less for a typical household.

Credit unions share many of the values of community companies, even though they operate in a different manner, and are owned entirely by their customers, who are all members. The credit union model has been championed by Labour MPs for decades. 

Since the financial crisis, credit unions have worked with local authorities, and their supporters see them as ethical alternatives to the scourge of payday loans. The Oldham credit union, highlighted by McDonnell in a speech to councillors in 2016, offers loans from £50 upwards, no set-up costs and typically charges interest of around £75 on a £250 loan repaid over 18 months.

Credit unions have been transformed from what was once seen as a "poor man's bank" to serious and tech-savvy lenders where profits are still returned to customers as dividends.

Then there is John Lewis. The "never-knowingly undersold" department store is owned by its 84,000 staff, or "partners". The Tories have long cooed over its pledge to be a "successful business powered by its people and principles" while Labour approves of its policy of doling out bonuses to ordinary staff, rather than just those at the top. Last year John Lewis awarded a partnership bonus of £89.4m to its staff, which trade website Employee Benefits judged as worth more than three weeks' pay per person (although still less than previous top-ups).

To those of us on the left, it is a painful irony that when John Lewis finally made an entry into politics himself – in the shape of former managing director Andy Street – it was to seize the Birmingham mayoralty ahead of Labour's Sion Simon last year. (John Lewis the company remains apolitical.)

Another model attracting interest is Transport for London, currently controlled by Labour mayor Sadiq Khan. TfL may be a unique structure, but nevertheless trains feature heavily in the thinking of shadow ministers, whether Corbynista or soft left. They know that rail represents their best chance of quick nationalisation with public support, and have begun to spell out how it could be delivered.

Yes, the rhetoric is blunt, promising to take back control of our lines, but the plan is far more gradual. Rather than risk the cost and litigation of passing a law to cancel existing franchises, Labour would ask the Department for Transport to simply bring routes back in-house as each of the private sector deals expires over the next decade.

If Corbyn were to be a single-term prime minister, then a public-owned rail system would be one of the legacies he craves.

His scathing verdict on the health of privatised industries is well known but this month he put the case for the opposite when he addressed the Conference on Alternative Models of Ownership. Profits extracted from public services have been used to "line the pockets of shareholders" he declared. Services are better run when they are controlled by customers and workers, he added. "It is those people not share price speculators who are the real experts."

It is telling, however, that Labour's radical election manifesto did not mention nationalisation once. The phrase "public ownership" is used 10 times though. Perhaps it is a sign that while the leadership may have dumped New Labour "spin", it is not averse to softening its rhetoric when necessary.

So don't look to the past when considering what nationalisation and taking back control of public services might mean if Corbyn made it to Downing Street. The economic models of the 1970s are no more likely to make a comeback then the culinary trends for Blue Nun and creme brûlée.

Instead, if you want to know what public ownership might look like, then cast your gaze to Nottingham, Oldham and dozens more community companies around our country.

Peter Edwards was press secretary to a shadow chancellor, editor of LabourList and a parliamentary candidate in 2015 and 2017.