Charity Shops

How local councils are passing the costs of cuts onto charities

Fears are rising that cash-strapped Councils are reacting to continued budget cuts by passing on costs to local charity shops. The longer-term settlements accepted by the vast majority of confirms for us that cuts to Town Hall budgets will continue for some time and so it is likely that these concerns will only increase as we move forward.

Costs are passed on to charity shops in three main ways. Firstly, Councils begin to charge charity stores for services which were previously free, or significantly increase the charges for existing services. This increases the operating costs of charity shops and undermines their ability to raise funds for their charitable cause.

This often focuses around new waste charges, which we feel are perverse when considering how much the charity retail sector saves local authorities in waste disposal costs. To take textiles alone; charity shops diverted 333,000 tonnes of clothing from landfill in 2017, saving councils £27m in Landfill Tax charges.

As a result of such wider environmental benefits, charity shops have always been recognised in waste disposal rules. The controlled waste regulations, in place for England and Wales, and also for Scotland, make it clear that the small amount of donated goods which a charity shops is not able to sell or recycle remain classified as household waste. This is because they have been donated from a household and not treated or amended in any way.

For these reasons, councils have usually accepted this type of waste for free at the household recycling centres. But as our members frequently report, this long-term understanding is breaking down.

For example, Animals in Distress is a small chain of charity stores active in Torbay and the West Country. Their shop operation contributes to running a Rescue Centre cares for and re-homes unwanted domestic animals. They re-home over 600 cats, dogs, rabbits and guinea pigs every year.

The chain is able to sell the vast majority of goods (more than 95 per cent) donated to its stores. However, in addition to the fraction of donated goods which they cannot sell, one of their stores in particular has become the focus of fly-tipping and illegal dumping on the forecourt.

Animals in Distress have long enjoyed an excellent relationship with Torbay Council, who, in recognition of the fact that the waste they need to dispose of is domestic in origin, have not charged them to dispose of it at the local waste and recycling centre.

However, in 2010 a new disposal price of £22 per tonne was introduced, and in 2015 the price was increased again to £145 per tonne: the full commercial rate.

This is having a crippling effect on Animals in Distress’s retail fundraising efforts. They are currently being charged in the region of £1,300 per month to dispose of unsaleable items that have been left at their shops. This equates to around £15,000 per year.

This money could be better spent to fund another Animal Welfare Assistant, care for 20 animals and find them a new home or provide veterinary care for 375 animals while they are at the Rescue Centre.

Secondly, tax reliefs can be restricted. Across Great Britain, if an outlet meets the definition of a charity shop – namely that it gives all of its profits to a designated charity and sells ‘wholly or mainly donated goods’ – then it is entitled to a mandatory rate relief of 80 per cent.

The local business rates collection authority then has the discretion to top up this rate relief by anything up to 20 per cent – which would give the charity shop a full 100 per cent relief on its rates.

Our members have told us that this is very rare and indeed a recent report we commissioned from the independent think tank Demos, concluded that just one in seven shops get this additional 20 per cent rate relief.

Thirdly, in the search for new ways to generate income, councils seek to profit from undertaking activities traditionally carried out by charity shops. These may threaten charity shops by undermining their ability to generate stock, something vital to their ability to trade.

For example, Brighton and Hove City Council recently stopped licencing clothing collection bins in the city and took direct control of them itself, keeping any profits made by selling on the donated items, and ring-fencing these for certain council provisions. This had a huge impact on our local charity members, like Traid, who rely on donation bins.

Central Bedfordshire Council has taken this approach one step further and started collected clothing and electrical items they deem to be re-saleable from the doorstep whilst making the usual refuse runs. They then generate profit from these collections.

In this way the council has set itself up as a direct competitor to charity shops in the area in a fight to get good quality donations of second hand goods. This has difficult repercussions for charity shops as it’s a lot harder to persuade people to take their second-hand goods into a charity store when they know the council will take it for free the next week.

In each of these examples, charity shops ability to raise income for their parent cause is undermined. Furthermore, the additional social value they generate for communities, economies and environments across the country is limited.

We want to understand exactly how widespread these problems are, and so in 2017 we embarked on a landmark project using the Freedom of Information Act to survey all councils in England, Wales and Scotland about their policies towards charity retailers. We will be releasing the findings from this project shortly.

By Matt Kelcher
Head of Public Affairs and Research