From executive agency to charity status

In 2013 the Department for Culture Media & Sport (DCMS) announced proposals to transfer control of the operation of over 400 sites of historical interest in England to a new body which would retain the name "English Heritage" but instead of being part of an executive agency responsible to government it will be a charity.

The proposals are currently subject to consultation with the public and other interested parties and so some of the finer detail may be subject to change. However, English Heritage is now part of a steady flow of organisations in both central government and in local authorities which have moved or are moving from public control into the charity world.

Undoubtedly one of the main factors behind this movement away from the public sector has been financial. Many local authorities, for example, are spinning off enterprises which in the past they have wholly funded because they are unable to maintain previous funding and are having to deal with substantial cuts to their own budgets.

The English Heritage Consultation acknowledges that the transfer to the new charity will be accompanied by a reduction in grant in aid which over an eight year period will fall from £69.3 million each year to nothing at all within eight years. They expect the difference to be made up by the charity raising money through a mixture of membership fees, admission charges, sponsorship and legacies.

The benefits of the new arrangements

There is an acceptance in the consultation that being subject to an annual settlement with the Treasury has not worked well for English Heritage. Reductions in the grant to English Heritage required by the Government to bring its own expenditure under control have made longer term planning more difficult especially for a proper programme to deal with outstanding repairs. This has led to a backlog of work on essential maintenance on many of its properties.

The transfer into charity status will be accompanied by a one off payment of £80 million much of this earmarked to make a start on this backlog. Going forward the charity will be expected to cover the maintenance costs from its own resources.

At present the Historic Buildings and Monuments Commission is an executive agency of the Government. As well as English Heritage the commission is responsible for the listing of historic buildings and enforcement of restrictions on development of listed buildings. The proposals remove English Heritage from the commission and the commission will in future concentrate on its regulatory role concerning listed buildings.

It is felt that the new charity will benefit from concentrating on its core function of maintaining historic buildings and making them accessible to the public. Separating the charity from indirect government control may open up new sources of funding from third parties especially those that are themselves dedicated to supporting charities.

More attractive outcome

It is hoped that once English Heritage is free to set its own priorities the offering generally will become more attractive. Certainly, the projections on visitor income assume that substantial new numbers of visitors will be attracted to the historic buildings.

The feeling is that a more commercial approach can be adopted which will increase income in the following years. This approach would include more imaginative use of the properties to raise additional funds and a major drive to increase visitor numbers, and better use of the annual membership scheme English Heritage currently has.

As a charity any surpluses of income can be used by the charity as it thinks best to achieve its overall purposes compared to the current situation where a surplus would lead to a reduction in grant in aid.

As a quasi-government organisation there are restrictions on marketing and promotion that the new charity will not be subject to. It is hoped that this will be another means of encouraging the growth in visitor numbers which English Heritage will need.

Much of the charity's income and gains will be exempt from income and capital gains tax. There is more limited scope for savings in VAT and much of the maintenance and repair work may be subject to VAT that cannot be reclaimed.

There are some reasonable grounds for optimism with this approach. In 2012 the British Waterways Board became the Canal & River Trust a charity. By all accounts the new charity is working well and is enjoying its new found freedom from government control.

Potential problems

The move to a charity does impose obligations on trustees as outlined in the Charities Act 2011 and in charity law generally. Anyone taking on the position as a trustee of a charity should seek advice on their duties and responsibilities or at the very least read some of the literature produced by the Charity Commission on the obligations of trustees. This is different from the position of members of a statutory board created by government.

Moving staff from one entity to another sometimes causes difficulties. In this case, the TUPE provisions will apply and so employees should retain the same terms and conditions as they currently enjoy. They may also continue to enjoy the benefit of the Principal Civil Service Pension Scheme as provided for under the Public Services Pensions Act 2013.

The intention is that the properties currently looked after by English Heritage will be retained by the Historic Buildings and Monuments Commission and the new charity will be permitted to occupy and improve them under the terms of a licence agreement with the commission. That maintains public ownership of historic buildings and places of interest.

The commission plans to use the licence as the basis of a service agreement with the charity including setting the number of days the collection of historic buildings and places of interest should be open to the public, providing for free educational visits by schools and it will incorporate provisions for the regular monitoring of the charity's performance. It is envisaged that if the charity fails to meet its performance targets the collection will revert to the commission. Were such a thing to happen no consideration has been given to the position of the charity trustees.

The Historic Buildings and Monuments Commission will retain the power to continue to list and in some case acquire properties on behalf of the nation. It is not entirely clear whether these new properties would be passed over to the charity for management, and if so whether there would be additional resources available to the charity to cover emergency repairs and such like. After all, the charity will have carefully budgeted for its expenditure each year and it simply may not be possible for it to undertake unexpected expenditure.

Merits of being a charity

Overall, the move to a charity in the longer term transfers the costs of maintaining historic buildings from the state to an independent entity.

The choice of a charity as the most suitable means of securing future funding for the historical properties is a sensible decision. After all, a charity can make a profit although it has to be careful to ensure that any trading activities are hived off into an independent trading company wholly owned by the charity.

The charity is able to use its assets in furtherance of its objects and this will give it a much freer hand than it currently enjoys as a government agency to make use of the properties in a more imaginative way in order to realise funding that is currently not available to it. For example, as a charity it is able to receive grants from other charities which means there may be scope to enter into local arrangements with other charities to repair or restore buildings of particular importance in the locality.

The charity will enjoy tax reliefs as outlined earlier. These can be substantial depending on its sources of income and donations received can be subject to Gift Aid. Charities are also exempt from capital gains tax. In the case of English Heritage, however, since it will not give ownership of the properties to the charity and since there would be an outcry if buildings of historic interest were to be sold the scope for saving tax on capital gains is limited.

The Charity Commission will regulate the charity and will encourage the trustees to ensure that they are familiar with the objects of the charity. The Charity Commission produces literature for charity trustees advising them of their duties and responsibilities. The trustees are required to produce an annual report and this is used by many larger charities as an opportunity to showcase their activities and their successes over the year.

Hopeful outcome

The proposals follow a path that has been utilised by the government before. The use of a charity has worked in the past and there is no reason why with some imagination English Heritage the charity cannot also succeed and meet its very tough income targets over the next eight years.

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