When Does a Charity Become an Arm of the State?

How big is the state? It might seem like a bit of an odd question to ask and there are a number of ways you can answer it. We can look at how much it spends as a share of national income (expected to have been 44.8% in 2025/26), or how many people work for it (6.19 million as of December 2025), or even how many organisations exist as part of it (611 government departments, agencies, public bodies, ‘high profile groups’, public corporations, and devolved governments, plus 382 local councils).

Looking at the size of the state by its workforce or organisational structure still only tells part of the story. Sitting outside the official figures are a swathe of groups who rely on the public purse for a significant portion, and sometimes all, of their income – charities.

In 2024, large charities received £12.4 billion from taxpayer funds, through a mixture of contracts and grants

According to the latest analysis from the TaxPayers’ Alliance (TPA), there were at least 1,557 large charities in 2024, defined by the TPA as having incomes of at least £10m, and more than half of them, 811, received some form of income from government sources. The level of that funding varies considerably, with 380 receiving at least a quarter, 257 receiving at least half, 165 coming in at three quarters, and 21 getting at least 99% of their money from taxpayers. All told, £12.4 billion was given to large charities – £7.9 billion in contracts and £4.5 billion in grants.

It’s important to stress that there’s nothing inherently wrong with this. Having charities deliver public services is not a new concept. They’re often far better at actually delivering than a cumbersome bureaucracy in Whitehall. Being rooted in communities and truly understanding the problems that they want to solve allows them to break free of the usual one-size-fits-all approach that so often fails to get much done no matter how much cash is thrown at it.

That being said, where we have organisations spending vast sums of taxpayers’ money, there are certain standards they should be held to.

Take the Walk Wheel Cycle Trust, formerly Sustrans, for example. In 2023-24 they received £132m from taxpayers which accounted for 90% of their income. Despite this reliance on government funding, the Walk Wheel Cycle Trust is not merely a group delivering clearly defined government programmes. Instead, it is an active participant in public policy debates, producing research and briefings often advocating for expanded cycling infrastructure, reduced car usage, traffic calming measures and wider behavioural change in transport policy. A perfect example of this is 20mph speed limits. These restrictions are far from universally popular, and yet the Walk Wheel Cycle Trust has been pushing for them for more than a decade.

Charities are perfectly entitled to campaign and advocate for their favoured policies, but when they’re so reliant on government to stay afloat, the line between independent civic advocacy and state-sponsored lobbying becomes blurred.

By contrast, the British Council is a registered charity but has also been formally classified as an arm’s length body (ALB) by the Cabinet Office. In 2023-24 it had total income of £989.3m according to the Charity Commission, with £215.6m of that coming from government sources, representing a comparatively small 22%. Recognition as an ALB reflects not just the scale of funding it receives from taxpayers but also its clear and explicit governmental role promoting UK soft power, cultural relations, education and the English language overseas. This dual charity/ALB status confers rigorous transparency and accountability requirements, in line with other governmental organisations. And it gives taxpayers insight into how their money is spent. This arrangement should serve as a model for how all large, state-dependent charities should be treated.

Where taxpayers’ money is concerned, transparency about what it’s spent on and accountability of those who decide are absolute essentials but at present they’re sorely lacking in large charities.

So what can be done about it? For starters, let’s call a spade a spade.

Or rather, let’s reclassify any large charity that receives more than 50% of its income from government sources for three years as an ALB. A dual classification like that enjoyed by the British Council would bring much needed clarity, ensure proper democratic oversight and reinforce public trust. This isn’t about expanding the state, simply acknowledging its existing footprint.

Where a large charity receives over 25% of its funding from government sources for three years, it should be made subject to the Freedom of Information Act 2000 and public sector reporting standards, including trade union facility time, senior staff remuneration and performance metrics.

More generally, any charity that receives more than 10% of its income from taxpayers should be prohibited from political campaigning or lobbying. It’s perfectly reasonable to expect taxpayers’ money to be going towards service delivery, not lobbying for policies they may profoundly disagree with.

Britain’s charities play an enormously important role in national life. But preserving trust in genuine civil society organisations requires drawing clearer boundaries between independent charities and taxpayer-funded extensions of the state.

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