The Smith Institute

Registered Charity No. 1062967

You can also view the colour PDF version of The Smith Institute inquiry report.

A statement of the results of an Inquiry into The Smith Institute, published on 18 July 2008.

Contents

• Introduction
• The Charity 
• Background: Previous engagement between the Charity Commission  and the Institute in 2001/02
• Sources of Concern in 2006/07 
• Commission Inquiry
• Timescale and Conduct of Inquiry
• Issues examined by the Inquiry
• Findings
  • The 2002 commitments
  • Whether educational and research work undertaken is educational in a charity law context
  • Whether the Institute is carrying out political activities inappropriate for a charity
  • Finances of the Institute
  • Governance of the Institute
• Conclusions
• Regulatory action taken during the course of the inquiry
• Developments since the Commission's Intervention
• Actions Required of the Trustees
• Resources Applied
• Issues for the wider sector
• Annex 1 – Educational Material Examined
• Annex 2 – Conduct of the Inquiry

Introduction

1. The Smith Institute (“the Institute”) is a registered charity advancing education in the field of study and research into the economy of the United Kingdom.

2. The Institute is one of a classification of organisations popularly known as 'think tanks'. These are organisations whose main aims are to carry out education and research activities into social, economic and public policy issues, to consider solutions to the problems they identify and to publish their ideas for resolving them.  Not all 'think tanks' are, or aspire to be, charities. 

3. Those which are charities carry out important educational work in the field of public policy development. They do this by promoting a high quality of public debate, public education, awareness and decision making on public policy issues.

4. Given the nature of their work, these charities may have a close association with a particular political perspective. However, as educational charities, they cannot promote a particular political or any partial point of view but must carry out their public policy work with a methodology which is balanced and impartial, leading the public and other interested persons to consider their proposals as being objectively formed.  Still less can the charity be involved in promoting or supporting directly a particular political party.  Accordingly, trustees of charitable 'think tanks' have a responsibility to ensure the political neutrality of the work they do.

5. The Commission recognises the integral part that contributors and speakers play in the effective delivery of the educational purpose of a charity of this nature.  While a number of these individuals are named and/or quoted in this report, it should be stressed that the Inquiry focused on how the trustees discharged their responsibilities and duties under charity law.  The Inquiry did not seek to judge those speakers and/or contributors named in the report.

The Charity

6. The Institute was founded in memory of the late Rt. Hon John Smith MP, former leader of the Labour Party. It is governed by a Trust Deed dated 23 October 1996 and its founding trustees were Lord Gregson, Lord Haskel and Baroness Ramsay of Cartvale. It was registered as a charity with registration number 1062967, on 19 June 1997.

7. Its charitable purpose was, and remains:

'The advancement of the education of the public in the field of study and research into the economy of the United Kingdom.'

8. The Institute is an educational charity¹. It holds interactive seminar events, conducts research and publishes material such as transcripts, speeches and collections of essays on its website² (www.smith-institute.org.uk).

9. Its current trustees are: Lord Elder (Chair), Paul Myners (Deputy Chair), Lord Haskel, Lord Joffe, John Milligan, and the Right Rev. Dr John Sentamu, Archbishop of York³.

10. The Institute's consolidated accounts for the year ended March 2007 show an income of £755,135.

11. The Institute employs three full time members of staff and a director, Wilf Stevenson (“the Director”), who works part-time. The Director is responsible for the daily running of the Institute. In addition, the Institute periodically employs Senior Research Fellows who provide advice and guidance on the research programme and participate in events⁴.

12. The Institute operated a non-charitable trading company called SI Events Limited, which ceased to trade on 31 March 2008. It organised events, arranged printing and undertook research work on behalf of the Institute.

Background: Previous engagement between the Charity Commission and the Institute in 2001/02

13. The Charity Commission (“the Commission”) contacted the Institute in February 2001 following concerns raised publicly that the Institute may have been engaging in activities which were inconsistent with its charitable purpose, and which brought into question its independence from the Labour Party. The Commission raised and discussed its concerns with the then trustees and the Director of the Institute, and received their full co-operation.

14. The Commission closed its case in March 2002. It advised the trustees in writing that they must be vigilant in ensuring that the way in which they carried out their educational work complied with charity law, and provided tailored guidance on how to do so.

15. The advice and guidance the Commission gave the Institute included explaining what advancing education means in a charity law context and the case law relevant to educational charities. Given the political environment in which the Institute operated, the Commission gave the trustees advice highlighting the need to safeguard the Institute's independence and manage the public perception that it was linked to the Labour Party.  The Commission provided the Institute with copies of its then guidance Political Activities and Campaigning by Charities (CC9)⁵.

16. In an exchange of letters with the Commission, the trustees agreed to make the following changes to the governance of the Institute (“the 2002 commitments”) to:

16.1 appoint additional trustees⁶;

16.2 make a clear statement in each booklet and publication that the Institute has no political connection and no intention of promoting a particular point of view. The trustees accepted that there may be advantages in making it clearer that they are not an "Institute that some people might inadvertently assume is simply 'promoting the thoughts of John Smith''';

16.3 adopt a clear policy on the selection of areas of study and research, and the formulation of a more structured means of deciding which topics should be chosen. To do this the trustees resolved to set up an Advisory Committee to advise on the Institute's events and publishing programme, and to suggest future activities;

16.4 refrain from using forewords by prominent members of the Labour Party in publications. The Commission advised the Institute about the implications of this, and in particular that many readers could regard such forewords as evidence of partiality rather than as neutral information on which to draw independent conclusions. The trustees confirmed in writing that they would not include any such forewords in the future; and

16.5 consider carefully the implications of using 11 Downing Street and the value of holding seminars at neutral venues.

Sources of Concern in 2006/07

17. In late 2006 concerns were raised by the media about the work undertaken by the Institute. The Commission was contacted by a media organisation⁷ expressing concerns about the Institute's activities. At about the same time, a newspaper article was published which implied that the work of the Institute was being used as a basis for policy formation by advisers who supported the Rt. Hon Gordon Brown MP, the then Chancellor of the Exchequer.  It was stated that the Institute had sometimes held seminars at 11 Downing Street and that it had employed Ed Balls, previously the Chief Economic Adviser to HM Treasury. It was also stated that money was coming to the Institute in increasing amounts in the expectation that the then Chancellor 'will be in power within a year'⁸.

18. Given the issues discussed with the Institute during the Commission's previous engagement with it and the nature of the new concerns raised, the Commission needed to establish:

a) the validity or otherwise of the concerns;
b) the extent to which the Institute had implemented the 2002 commitments; and
c) whether there were other regulatory issues.

19. As a result of this, the Commission opened a compliance case on 28 November 2006.

20. Subsequently, further concerns were raised publicly⁹ about perceived links between EMI¹⁰, a policy announcement by the then Chancellor about the enforcement of copyright law, and seminars¹¹ organised by the Institute on the same subject¹².

21. On 19 December 2006 the Commission met with the Director and some of the trustees to discuss their response to the concerns.

22. On 30 January 2007 concerns were raised publicly about comments made by Robert Shrum, a paid Senior Research Fellow of the Institute, at an event organised by the Institute on 16 March 2006¹³. The Commission examined what appeared to be a transcript of this event but which it was later informed was a draft unpublished article concerning the event produced by Robert Shrum¹⁴. A further meeting with the Director took place on 31 January 2007 to discuss these and other concerns.

23. Against this background, the Commission decided that the issues were not capable of immediate resolution, and that further regulatory action was necessary.

Commission Inquiry

24. Due to the potentially serious and recurrent nature of the concerns, the risk to the Institute's reputation and the Commission's responsibility to safeguard public trust and confidence in charity, the Commission opened an Inquiry on 1 February 2007 using its powers under section 8 of the Charities Act 1993 as amended by the Charities Act 2006 (“the Act”). 

25. The purpose of the Inquiry was to consider whether the Institute was both established and operating as a charity in accordance with its charitable purpose and whether it was actually advancing the education of the public in the field of study and research into the economy of the United Kingdom.

Timescale and Conduct of Inquiry

26. The Inquiry was opened on 1 February 2007 and closed on 16 July 2008.

27. The Inquiry involved an examination of the organisation, activities, financial records, and management of the Institute. The Inquiry required the collation and in-depth analysis of a significant volume of documents, and extensive engagement with the trustees and their advisers.

28. A range of educational material produced by or on behalf of the Institute was examined, a list of which can be found in Annex 1. Specific criteria (see paragraph 43) were applied in order to establish whether this material could be educational in the charity sense.

29. In light of the specialist nature of the work, the Commission conducted a tendering exercise to identify an independent expert to carry out an assessment of some of the selected material, which the Commission would consider alongside its own initial findings. CRG Research Limited (“the independent expert”), a Cardiff based consultancy company (a research and evaluation services provider experienced in evaluating public policy documents), was commissioned to undertake this work.

30. The Inquiry shared the independent expert's findings with the Institute. The Institute commented and raised concerns about the methodology applied by the independent expert and some of their findings. The Inquiry considered the concerns raised by the Institute but is nonetheless broadly satisfied with the independent expert's work.

31. Further details about the conduct of the Inquiry can be found in Annex 2.

Issues examined by the Inquiry

32. The Inquiry examined the following issues:

Issue 1

33. The 2002 commitments.

Issue 2

34. Whether the educational and research work carried out by the Institute is educational in a charity law context, including whether its work is:

a) in furtherance of the purpose of the Institute by advancing the education of the public in the field of study and research into the economy of the United Kingdom;
b) of educational value or merit;
c) balanced and not seeking to promote a particular point of view; and
d) made sufficiently available to the public.

Issue 3

35. Whether the Institute is carrying out political activities inappropriate for a charity by supporting:

a) party politics - in particular the Labour Party;
b) development or promotion of HM Treasury or wider Government policy; or
c) promotion of the aspirations of political figures.

Issue 4

36. Finances of the Institute.

Issue 5

37. Governance of the Institute.

Findings

Issue 1: The 2002 commitments

38. Commitment: Additional trustees (see paragraph 16.1)

38.1 As of 1 February 2007 and since 2002, the Institute has appointed John Milligan, Paul Myners and the Right Rev. Dr John Sentamu as additional trustees. The trustees informed the Inquiry that 'as far as we are aware', Dr Sentamu and Paul Myners are not 'aligned with or active in any political party' and that John Milligan 'has supported the Labour Party financially'.

38.2 The Inquiry found that donations to Gordon Brown's Leadership Campaign Fund are listed as having been received from Paul Myners (25 May 2007 and 25 June 2007) and from Ballathie Estates Limited (25 June 2007)¹⁵. John Milligan is a Director and major shareholder of Ballathie Estates Limited.

38.3 The Institute also informed the Commission that in June 2006 the trustees had decided to review the Institute's governance and recognised the need to establish rules for the appointment and succession of trustees.

38.4 More recently, in October 2007 the Institute outlined its proposal 'to appoint at least one trustee with public allegiance to each of the main opposition parties….[as this would] beneficially affect the perception of partisanship.'

38.5 During the closing stages of the Inquiry the Commission was told that Lord Elder had been appointed as a trustee¹⁶ whilst Baroness Ramsay of Cartvale and Baroness Rendell of Babergh had retired. The trustees are currently advertising to recruit new trustees.

39. Commitment: Statement of purpose (see paragraph 16.2)

The Institute has now included a clear statement of its purpose in each of its publications, in order to explain that it has no party political connection and no intention of promoting a particular point of view¹⁷. All reference to the late Rt. Hon John Smith MP was removed from the Institute's publications and notepaper.

40. Commitment: Selection of educational work to be undertaken (see paragraph 16.3)

40.1 The trustees chose to fulfil this commitment through the establishment of an Advisory Committee in February 2002.

40.2 Its purpose was to advise the trustees about the Institute's programme of seminars, conferences, events and its publishing programme, and to make suggestions on areas for future research and educational activity. The Committee currently has 13 members who the Commission is satisfied offer a range of expertise in academic and business disciplines.  The Commission recognises that this was a positive step taken by the Institute to meet this commitment.

40.3 However, in practice, the trustees did not use the Advisory Committee in a way which fully achieved its intended purpose.  Details of the Inquiry's findings in relation to the management and role of the Advisory Committee are set out in its findings on the governance of the Institute in paragraphs 163-171.

41. Commitment: Use of forewords in publications (see paragraph 16.4)

41.1 The Commission's concern was that the use of forewords by prominent members of the Labour Party in publications could lead to a perception that such publications endorsed a particular party political viewpoint.

41.2 The trustees have on the whole ceased to use forewords by prominent members of the Labour Party in publications.

41.3 The Inquiry found only three publications¹⁸ produced since 2002 that contained forewords by Labour MPs¹⁹. The Commission accepted that in some circumstances the inclusion of forewords might be appropriate²⁰.

41.4 However, the trustees were still allowing Labour MPs, but not MPs of other parties, to introduce events orally which had the same effect, when transcribed in the Institute's publications, as the inclusion of a foreword.

41.5 While the trustees have taken some steps to implement the commitment, it is the Commission's view that if the trustees decide to still use contributions in this way this is likely to result in questions being raised by the public about the neutrality of the Institute's educational work. This would mean that the trustees must take further steps to manage these risks in other ways. The Commission's concerns in this regard had therefore not been addressed fully.

42. Commitment: Use of 11 Downing Street (see paragraph 16.5)

42.1 In 2001/02 the Commission expressed its concerns to the trustees that the use of 11 Downing Street may affect public perception of the Institute's political neutrality, especially as it previously had been criticised by third parties for its links to the Labour Party.

42.2 The Inquiry examined the Institute's use of 11 Downing Street. In the period from September 2005 to August 2006, 61 Institute events were held, of which 27 were held at 11 Downing Street, 20 were held at Party Conferences²¹, and 14 were held at other locations. In 2001/02 the Institute held 38 events, 15 of which were held at 11 Downing Street. 

42.3 HM Treasury confirmed that the Institute is not given exclusive or preferential access to 11 Downing Street, and that the venue is available for use by other charities on identical terms.

42.4 There is no evidence from the trustees' minutes that they evaluated the use of 11 Downing Street for events²². The Inquiry was subsequently told that the trustees did, however, consider these issues at trustees' meetings.

42.5 The trustees explained to the Commission that in their view, using such a prestigious venue which is 'part of the national fabric and not in any real sense party political' is of great benefit to the Institute. The Institute told the Inquiry that not using 11 Downing Street:
'…would have been self-defeating and possibly a breach of their trusteeship for the Trustees of the SI [the Institute] to have turned their back on the perfectly proper benefits which could accrue to the Charity from that support, though they accept that discretion needs to be exercised to stay within the circle of impartiality required of charities, and they accept that they have not managed this to perfection.'

42.6 The Commission accepts that 11 Downing Street is a prestigious venue which is likely to attract participants to events organised there, and other organisations seek to use it for the same reason. However, the Institute, by its very nature, is operating close to the political environment. Anything it does which may have political implications needs to be carefully assessed and the risks, including the perception of inappropriate political connections, should be balanced against the benefits.

42.7 Given there was no evidence in the minutes, and taking into account the number of times that the Institute used 11 Downing Street, the Inquiry was not satisfied that the trustees fully addressed the commitment to consider carefully the implications of using 11 Downing Street and the value of holding seminars at neutral venues.

42.8 The Commission is concerned that the continued use of 11 Downing Street may have linked in the minds of the public the Institute with the Labour Party and the Government, and may have compromised the perception of the Institute's political neutrality.

42.9 The trustees now accept this and have promised to reduce their use of 11 Downing Street in the future.

Conclusion:   The Institute  took some positive steps to implement the 2002 commitments. However, the Institute's failure to implement certain key elements of the 2002 commitments given to the Commission as regulator, is a matter of concern and  has contributed significantly to the difficulties, media concerns and governance issues currently faced by the Institute. This resulted in the opening of the Inquiry.

Issue 2: Whether the educational and research work undertaken is educational in a charity law context

43. The Inquiry considered the Institute's work using the following criteria. These criteria apply to any educational charity carrying out this type of work. Whether the work is:

a) in furtherance of the purpose of the Institute by advancing the education of the public in the field of study and research into the economy of the United Kingdom;

b) of educational value or merit;

c) balanced and not seeking to promote a particular point of view; and

d) is made sufficiently available to the public.

44. If any one of these criteria is not satisfied, this would seriously impact on the Institute's ability to deliver its educational purpose and operate for the public benefit.

45. The Inquiry has taken into account the framework adopted by the Institute when assessing its work, as set out in a report written by the Institute for the Commission dated December 2006:

'The Trustees take the view that the Institute will be performing its role as an Educational Charity if, over a reasonable period of time, the Institute can demonstrate that it has:

• developed a programme which in the view of the Advisory Committee focuses on a broad range of medium term issues; and which demonstrably draws on the latest research and thinking;
• run a reasonable number of seminars and events covering the topics selected by the Advisory Committee as being appropriate;
• researched the topics to the best standard possible through using in-house staff, our senior research fellows, and partner institutions;
• invited speakers of high standing and expertise;
• engendered a lively and informed debate around each topic;
• published a reasonable number of monographs containing specially commissioned essays by persons of high standing and expertise;
• published transcripts of the seminars and events on paper and on the website.'

A:   Is the Institute's work educational in the field of study and research into the economy of the United Kingdom?

46. The trustees have applied a broad interpretation of the word “economy”, being 'all the political, cultural, economic and social inputs and outputs that describe the capacity of a country to thrive and prosper'.

47. The Commission accepts that this broad definition of the "economy” can be used by the trustees. However, in line with its charitable purpose, the economy of the United Kingdom must remain the central focus of their work.

48. The Inquiry found that generally the Institute's work fell within the subject matter of the economy of the United Kingdom. In some cases, this may not have been immediately obvious. For example, the publication Economic Nationalism analysed the economies of other countries, yet was appropriate as the primary focus of the study was on the developed markets of the United Kingdom.

49. However, the Inquiry found that some pieces of work that the Institute produced did not entirely fall within the scope of the economy as interpreted by the Institute. One example is some of the work produced under the Progressive Consensus²³ strand, the subject of which was a primarily political concept rather than being about the impact of that concept on the economy of the United Kingdom. Our views on this strand are shared by the independent expert.

Conclusion:   The Commission concluded that almost all of the Institute's work fell within the subject matter of the economy of the United Kingdom.   Going Forward:   The trustees must ensure that all of the work it carries out, or is carried out on its behalf, is within the subject area of its charitable purpose.

B: Is the Institute's work of educational value or merit?

50. There are two main aspects the Commission considers when assessing the educational value or merit of work conducted by this type of charity. These are first, is the content capable of having educational value or merit and second, is the process of delivery such that it does provide educational value or merit?

Content

51. Generally, the work undertaken by the Institute that was considered by the Inquiry was capable of having educational value or merit. This view was supported by the independent expert.

Process of Delivery

52. The charity law framework for advancing education allows education to²⁴:

52.1 be carried out by means of a wide range of activities undertaken by charities;

52.2 take a number of forms;

52.3 be developed in communities in a way which develops individual capabilities, competencies, skills and capacities;

52.4 include less traditional or formal processes (provided they are capable of leading to learning) including providing information in a structured manner (organisation of material and/or processes) to advance the knowledge or abilities of recipients.

53. The Inquiry took all of these factors into consideration when it examined the work of the Institute, and whether it had organised and presented its educational material in a way that makes it capable of advancing the knowledge and abilities of the intended recipients²⁵.

54. The Commission found that, in principle, the processes and methodology of the Institute, through its round-table meetings, seminars, lectures and publications, is capable of delivering educational value to both the attendees at such events and those using the Institute's publications.

55. The Institute told the Inquiry that each activity is a component of a wider strand of work. Consequently, when considering aspects like balance and educational merit, an individual piece of work cannot be considered in isolation but must be assessed within the context of the wider programme of work. The Inquiry accepted this as a premise.

56. However, better structuring and signposting of the Institute's programme of events would make it clearer to participants that a particular event or publication is part of a series. The trustees have agreed to formulate a statement to make this clearer to participants.

Conclusion:   The Commission concluded that almost all of the work undertaken by the Institute, and considered by the Inquiry, was capable of having educational value or merit.     The process of delivery could usefully have been improved in some areas to emphasise the holistic nature of the programmes and so that the educational value of that work could be more fully realised.

C: Is the Institute's work balanced and not seeking to promote a particular point of view?

57. Education, in a charity law context, does not have to be value free and completely impartial. Education can be based on broad values that are uncontroversial and which would be generally supported by objective and informed people. However, the advancement of education cannot be used to promote a political or a predetermined point of view²⁶.

58. Accordingly, although education can have an uncontroversial broad value base, it has to allow those being educated to make up their own minds on controversial issues. This means educational charities should:

a) research and present information in a balanced way;

b) consider the arguments in an appropriate way related to the evidence; and

c) ensure conclusions are based on evidence and analysis.

59. As an educational charity working in this area, the Institute must take particular care to preserve balance and neutrality given its close association with the political environment²⁷.

60. The Institute stated to the Commission in December 2006 that it:
'…will be able to demonstrate that it is not promulgating a single point of view if, over a reasonable period of time, the Institute can demonstrate that it has:

• focused on a broad range of issues and sought, in each case, to draw on the latest research and thinking so as to promote debate;
• selected contributors for commissioned essays in the specially published monographs who can display a range of views and perspectives;
• selected speakers who, across the piece, have a range of contrasting perspectives and views;
• invited more than one speaker at each seminar or similar event so that audiences are offered a range of opinions;
• generated an open and lively debate at each seminar or similar event;
• invited comments and feedback from those who attend the seminars and events, and acted on them where appropriate.'

61. The trustees informed the Inquiry that it was never the intent of the Institute to give a platform for a particular point of view.

62. The Institute has produced work which the Commission is satisfied is both balanced and neutral²⁸. However, the Commission considers that the Institute should make improvements regarding the balance and neutrality of some of its other work.  

63. The work giving rise to these concerns includes, in particular, some of the events and publications in which inappropriate party political comments and messages have been allowed²⁹. Political links to the Institute's work are discussed in greater detail in Issue 3 below.

64. The Inquiry was informed that the trustees consider that the 'vast majority of work ...  is balanced and impartial compared to the very small minority which has caused the Inquiry some concern'.

Conclusion:   Due to the amount and nature of party political content in some of the Institute's events and publications, the Commission concluded that the Institute's work was not always as sufficiently balanced and neutral as required under charity law.    This could have been achieved by the trustees exercising greater care and oversight over the type and content of work that the Institute produced.

D: Is the Institute's work made sufficiently available to the public?

65. Since 2001/02, the Institute has published the significant majority of its documents on its website, and these can be downloaded by any member of the public free of charge.

Conclusion:   The Institute's work is made sufficiently available to the public.

Issue 3: Whether the Institute is carrying out political activities inappropriate for a charity

66. The Inquiry considered the contributing factors and the various ways in which the Institute could be seen as being both political and party political.

67. An educational research charity working in the field of public policy development may well have an association with a particular political perspective. However, as an educational charity it cannot promote a particular political or other point of view. It must carry out its public policy work with a methodology which is balanced and impartial, leading the public and others to consider their proposals as being objectively formed.

68. Accordingly, trustees of educational research charities have a number of important responsibilities to ensure political neutrality in the work they do. This means that a charity cannot champion or otherwise support one political party and/or discredit another. A charity must also not assist any individual or political party in an election process³⁰. 

69. The Commission acknowledges that the Institute has, since its registration, only operated under a Labour Government. The Institute informed the Inquiry that:

'in many instances it has been appropriate to ask for a government perspective as a starting point in the debates, this needs to be taken into account when analysing perceptions of bias and partiality.'

70. When a charity operates close to the political environment, it must safeguard its independence³¹ and ensure that any involvement it has with political parties is balanced. It must retain its neutrality and autonomy when interacting with any political party and its members. In order to ensure this, trustees must closely monitor the scope and content of work undertaken in such a charity's name and where possible seek cross-party representation.

71. Given these charity law requirements, a charity should not consistently enlist the support of politicians from one political party.

72. Against these requirements, the Inquiry examined whether the Institute carried out or supported political activities inappropriate for a charity in the following areas:

a) support of party politics - in particular the Labour Party;

b) development or promotion of HM Treasury or wider Government policy; and

c) promotion of the aspirations of political figures.

A: Did the Institute support party politics, in particular the Labour Party?

73. The Inquiry considered two areas under this heading:

a) whether the Institute was used as a platform for party politics; and

b) whether there were inappropriate links to the Labour Party.

Was the Institute used as a platform for party politics?

74. During the course of the Inquiry the Institute sought and obtained 32 letters of support from prominent individuals, including Conservative and Liberal Democrat politicians, commending the Institute's political impartiality and independence.

75. The Commission accepts that the majority of the Institute's work examined during the Inquiry was not party political.

76. The Inquiry was informed by the Institute that:

'In the political marketplace party politicians are always on the lookout to impress opinion-formers and power-brokers. In the context of …[the Institute's] seminars that plays out predictably. The politicians present know that the audience is an informed, indeed expert, one and so know that if they are to make a good impression speaking in predictable, partisan terms is self defeating'.

77. However, the Commission found evidence of unchallenged party political comments being made at Institute events by politicians and also party political statements made by or on behalf of the Institute.

Comments by politicians

78. It is open to a charity to invite politicians to speak at its events providing certain safeguards are in place. First, where possible and appropriate, cross-party representation should be sought. Secondly, whoever the politician is and whatever political party they may represent or be associated with, the charity should brief the politician about the purpose of the event and have a reasonable expectation that the politician will not use the opportunity to promote any party political message.

79. The Inquiry found that trustees had on occasion allowed individuals to use the Institute to promote their own political party. The Inquiry also found that the trustees had not taken sufficient steps to mitigate the risks of this happening nor, where it did happen, the impact of this on the charity and perceptions about its independence.

80. Examples of when the Institute's events appeared to be used as a party political platform include the comments made by the Rt. Hon Margaret Beckett MP during the John Smith Memorial Lecture of 6 March 2007. She made comments during the course of her speech criticising the Conservative Party which included:

'Now, it's conventional wisdom today that strong economic growth creates the opportunity to build a fairer society – well at least out there in the real world it is, I'm not quite sure that our Conservative opponents have yet grasped the point.'

'Unlike the neuralgia that certainly overwhelmed the Conservatives at that time and indeed still rears its head from time to time on their benches.'

'Compare that to the early 1990s and the Major government when it was hard to see how the EU could move at all with a recalcitrant and obstructionist Britain, & when Britain's interest in Europe suffered because of an almost malign neglect.'

81. In response to the Inquiry's request for an explanation of her comments,  Margaret Beckett MP explained that she did not think that her statements:

'could lead anyone to doubt the high standards of independence, balance and objectivity a think-tank such as the Smith Institute aspires to, and in my view achieves, across its programme.'

82. She confirmed that she was aware she was speaking at a charity event. However, she also commented that:

'In the real world politicians inevitably express themselves in a partisan way, and I have always done so, whatever the occasion or venue.'  

83. The Institute accepted that Margaret Beckett MP's speech:

'certainly contained party political material, but no matter how much forward discussion and planning takes place, the Smith Institute and its Trustees cannot be held responsible or, indeed, have any control over what is actually said at those events.'

84. A second example relates to comments made by John Healey MP in 2004 at an Institute event³² (for further detail see below at paragraphs 105 -109), which may have led the public to believe that politicians were directing or had unfair access to a platform provided by the Institute for a party political purpose. The trustees' response was that John Healey MP had simply made some 'off-the-cuff' remarks which were meant to be humorous.   

85. These examples highlight the dangers to the reputation and independence of any charity in letting speakers give speeches unchallenged. In addition the trustees allowed inappropriate party political comments, which were made at events, to be reported word for word (which the Institute informed the Inquiry was their standard practice) and without any commentary, editing, qualification or disclaimer in Institute publications and disseminated to a wider audience.

86. The Institute highlighted to the Inquiry the 'tension between control and creativity in the conduct of Institute seminars and meetings' adding that:

'…with a distinguished group of participants selected specifically to represent diverse points in the spectrum of views pertinent to the matter under discussion, the educational purpose is best served by uninhibited expression of such views, even if they are very occasionally couched in directly partisan terms.'

87. In addition, the Institute stated:  

''…To believe that by a more prescriptive briefing or stricter chairing one could avoid any expression of partisanship shows a lack of understanding of the dynamics of the relevant events and of the context within which useful outcomes are likely to be best stimulated."

88. The Commission accepts the potential value to the Institute of inviting politicians to contribute to its programme of work. The Commission also recognises there is an increased risk that political contributors may make inappropriate party political comments.

89. There are risks to the reputation of a charity, particularly educational charities working in this area, in not managing the potential for party political messages being promoted at its events and in its publications. These risks can be managed by putting in place adequate safeguards to try to prevent this from happening, but if this does occur taking appropriate steps in mitigation.

Conclusion:   The Commission concluded that the trustees had not taken sufficient steps to mitigate the risks of party political comments being made at Institute events.  In the absence of such steps, a perception arose that some of the information being disseminated was intended to promote a particular party political point of view.     In particular, the Institute did not take steps to brief speakers adequately to make clear the constraints on speaking at a charity event, to address these party political comments during these events, or to deal with them as part of the subsequent editorial process. In addition, on some occasions there appears to have been little attempt to ensure that such events were chaired in a manner to ensure this happened.   Going Forward :   The trustees themselves have acknowledged they could do more to brief speakers adequately and they propose to give a clearer steer in their briefings to ensure that the Institute's position is not compromised.

Statements made by or on behalf of the Institute

90. The Inquiry found that comments made in the invitation to the Institute's Reinvigorating Communities event issued in January 2007 were clearly party political. It began by praising the electoral choices made by the British public resulting in successive Labour governments:

'Britain is a better country because of the choices that voters made in 1997, 2001 and 2005. More people have what they aspire to: a job; a decent income; and a home in a community which offers support and security. Schools are teaching children better. Hospitals and GPs are delivering a level of healthcare, free to all at the point of need, which the nation can be proud of. Crime, and fear of crime, is falling. Perhaps most importantly of all, at least 800,000 fewer children live in poverty, and pensioner poverty has all but been eradicated.'

Conclusion:   The Commission concluded that the language used by the Institute in its invitation to the Reinvigorating Communities event issued in January 2007 constituted a party political statement inappropriate for the charity. This inevitably compromised the Institute's independence and reputation.

91. In addition, the Commission also found that in 2006 the Institute's then Senior Research Fellow, Robert Shrum, had made inappropriate party political comments at an Institute event. During the question and answer session at the event Centre Ground or Common Ground: Progressives in the New Political Landscape³³ he made a number of party political remarks, including:

'So that leads me to say that you have to hold the Tories accountable for their opportunism and you have to expose their real purpose.  And by the way, that's the answer in terms of the Lib Dems, too.'

'I agree with you Labour cannot allow the Tories to set the terms of the debate. Labour cannot allow them to domesticate themselves and make people think about them as happy, “third way” sorts of people'.

92. The Institute accepts that:

'… Mr Shrum may have stepped over the bounds in viva voce responses in what, nonetheless, would, in robust academic circles, be considered an unexceptional way'. The Institute also commented that the incident was 'regrettable and it goes without saying that … [the Institute] will continue to do what they can to forestall that.'

Conclusion:   The Commission concluded that the Institute took insufficient steps to regulate inappropriate party political comments made by its Senior Research Fellow, Robert Shrum, at one of the Institute's events.   Going Forward:   The Institute maintains that:  'it is vital that what is published reflects as much as possible the live event.'   In the closing stages of the Inquiry, the Institute confirmed that it now includes disclaimers in its publications when the personal views of contributors are inadvertently expressed at events.

Were there inappropriate links to the Labour Party?

93. The Commission accepts that the Institute has used oral and written contributions from a variety of political parties. However, in practice, the substantial majority have been politicians associated with the Labour Party.

94. Due to the historical background and ethos behind the Institute's creation, the Institute inevitably attracts some people who support the Labour Party. The Commission understands and accepts that the Institute's trustees cannot ensure that people from all political persuasions contribute to its work or accept invitations to events. The Commission is satisfied that the mailing list of the Institute is politically diverse.

95. Nevertheless, according to the data available on the Institute's website³⁴, the Inquiry identified that of the 111 politicians³⁵ who contributed to at least one publication or transcript, 78 were Labour, 10 were Conservative, 10 were Liberal Democrats and 13 were Cross Benchers³⁶. On closer analysis, the most frequent political contributors, in descending order, were the then Chancellor (23 occasions³⁷), John Healey MP (8) and Rt Hon Stephen Timms MP (7). By contrast, the most frequent political contributor from the Conservative Party was Lord Bruce-Lockhart (3) and no politician from the Liberal Democrat Party contributed on more than one occasion.

96. The Institute informed the Inquiry that:

'When discussions do relate to current policy or legislation, the Institute usually invites the relevant Minister to contribute – a practice it would continue whichever party is in power.'

It also informed the Commission that the number of times MPs speak at events is influenced by the use of 11 Downing Street:

'Wherever possible, the Chancellor, or a Minister on his behalf, welcomes guests to the event. As such, the welcome is not strictly part of the event yet it sometimes gives rise to wider comments, some of which the Commission has asked the Institute to justify.'

Conclusion:   The majority of the Institute's work examined during the Inquiry was not party political.  However, there is evidence of unchallenged party political comments being made at Institute events by politicians and also party political statements made by or on behalf of the Institute.   The Commission concluded that this, combined with the predominant involvement of Labour Party politicians in the Institute's activities, compromised the Institute's independence.   Bearing in mind the previous engagement between the Commission and the trustees in 2001/02 on this matter, the Commission concluded that the trustees had not safeguarded or adequately supervised the risks posed to the independence and reputation of the Institute.

B: Did the Institute develop or promote HM Treasury or wider Government policy?

97. Both the Commission and the independent expert concluded that it was not possible to determine with a sufficient degree of certainty that there was a planned connection between the Institute's activities and the development of Government policy.

98. However, the Inquiry did find a number of instances where it was possible to see how the perception arose that the Institute was being inappropriately used to develop and promote policy in this way.

The concern regarding EMI

99. The Inquiry examined the specific concern that the Institute was being used by EMI, which was a donor to the Institute, as a platform to lobby the Government for changes in copyright legislation.

100. In December 2005, the then Chancellor commissioned an independent review into the UK Intellectual Property Framework (“the Gowers Review”). Prior to the commissioning of this report the Institute had begun a long-term programme of work focusing on the creative industries. This strand of work covered a variety of industries; it did not focus solely on the music industry and copyright.

101. In particular the Inquiry considered two Institute events involving EMI, ©8: Capitalising on Creativity³⁸ and The Wealth of the Nation: Seminar 1: The Creative Industries³⁹.

102. The Inquiry found that the Institute fixed the date for The Wealth of the Nation: Seminar 1: The Creative Industries weeks in advance of the Government's announcement on copyright. On two occasions during the event the Director commented that the purpose of the event was to think about long-term issues and specified that the 'horizon here is about 20 years.' The Commission is satisfied that neither event was linked to the Government's announcement.  

Conclusion:   No evidence was found to corroborate the concern that there was a planned connection between EMI and the copyright announcement, and the Institute.

Managing the perception that the Institute is linked to developments in Government policy for political advantage

103. The Institute informed the Inquiry that it does not accept that it can be accused of furthering wider Government policy. It also stated that it 'is only common sense that the starting point for much of our work will be current and immediately future government policies - even though the actual focus of the publication or event will always be the 5-10 year horizon or longer.'

104. However it is possible to see how, on a few occasions, some comments made by speakers at Institute events could have resulted in a public perception that the purpose of the event was the development of policy for the Government.

105. For instance, the Inquiry noted unscripted comments made by John Healey MP⁴⁰ acting as a 'last minute substitute for Gordon Brown' in the seminar entitled A More Equal Society? New Labour, Poverty, Inequality and Exclusion 3: Economic Issues delivered on 8 October 2004. This event was held at 11 Downing Street and his opening comments were:

'I have to say, this series of seminars in particular is being held not so much by the kind permission of the Chancellor, but by his absolute insistence that they take place. He is unable to be with us now, but he will want to know exactly what has been said in the discussion when I see him later this morning.'

106. He also stated that:

'However, we are at a point where, as we take stock towards the end of our second term in government, and as we prepare, I hope, for a third term and beyond, we are asking ourselves some hard questions about how far we have come and how much further we have to go, and this series of Smith Institute seminars is playing a very important part in helping us do just that.'

107. These remarks could lead an objective observer to conclude that the Institute allowed senior members of the Government to use its resources and expertise to develop government policy for political advantage. The Institute told the Inquiry that John Healey's opening remark was a 'throw away' comment and that he was bound to see the then Chancellor later on in the day by virtue of his position. 

108. John Healey MP 'profoundly' disagreed with the Commission's concerns, and stated that he did not believe that a:

'light-hearted remark as part of a few words of welcome could lead anyone reading the transcript to conclude that the then Chancellor of the Exchequer was behind an event, particularly when the seminar and the series of which it was a part met the high standards of independence, balance and objectivity I would expect of such a serious think tank as the Smith Institute.'

109. He also confirmed that neither the Institute, nor its programme nor any other aspect of its work were regularly discussed between himself and the then Chancellor, and that the Commission:

'have the significance of the Smith Institute completely out of proportion'.

110. Similar concerns about links to the Government, and in particular HM Treasury, arise in other publications, such as Starting them Young: Creating a culture of enterprise for all, Growing the Economy: the local dimension and Competitiveness.

Conclusion   The Commission accepts that coincidences in the timing of Institute events and Government policy announcements may occur. However, the trustees should have taken active steps to manage the risks to the Institute's independence and to minimise the perception that its work promoted or contributed to the development of Government policy for political advantage.   This could have been achieved by the careful briefing of speakers, choosing appropriate contributors, and other measures referred to in this report.

Managing the perception that the Institute promoted Government policy

111. The Institute and the University of St Andrews held an event on 3 June 2008 entitled New Challenges to Security, during which the Home Secretary, the Rt. Hon Jacqui Smith MP, delivered a lecture⁴¹. The lecture covered the responsibility of all governments to deal with the increasing threat faced from international terrorism. The Home Secretary gave 'an overview of how the government is dedicated to countering terrorism and violent extremism'⁴². Although the focus of the lecture was not the Counter Terrorism Bill, in the course of her speech she emphasised the Government's commitment to the Bill, including the proposed extension of the current maximum limit of holding individuals suspected of terrorism for 28 days without charge.

112. This Bill was introduced into Parliament by the Home Secretary on 24 January 2008. The Inquiry noted that the lecture took place the week before the Bill was to be voted on by MPs. A transcript of the lecture was posted on both the Home Office and Labour Party's websites prior to this vote⁴³.

113. The Institute first contacted the Home Secretary on 8 February 2008 inviting her to speak at the event. At that time, it was proposed that she would speak on 22 May 2008. Due to scheduling issues it was eventually agreed, in April 2008, that she would speak on 3 June 2008.

114. The Institute informed the Inquiry that it had 'no detailed knowledge of parliamentary timescales and had no way of knowing in advance that this issue would be in the public eye on the selected date.'

115. The Commission concluded that given the profile of this controversial Bill it could have been reasonably expected that this matter would be debated in Parliament between the date when it was introduced (24 January 2008) and before the start of the summer recess (the House will rise on 22 July 2008). The Institute confirmed arrangements to the attendees of the event five days prior to it taking place, at which point the general timing and significance of the Parliamentary vote was widely known⁴⁴.

116. The Institute told the Inquiry that the Home Secretary's lecture formed part of a balanced programme of debate about Britain and its security, and that the Shadow Defence Secretary had been invited to speak in October 2008.  In his introduction to the lecture, the Director put it in the context of the strand of work overall. The Inquiry accepted that a strand of work focusing on security issues is capable of furthering the Institute's charitable purpose and that overall the Institute's plans for this strand are balanced and neutral.

117. The Institute told the Inquiry that 'it is looking to stimulate discussion on issues on a 5-10 year horizon, and resists absolutely the implication' that the Institute gave the Home Secretary a platform to promote Government policy and legislation.

118. The Institute also informed the Inquiry that it 'recognises the potential dangers of holding an event when public attention is focused on a topic.'

119. The Inquiry was informed that the trustees do not believe that this lecture 'impacts on the independence and neutrality of the Smith Institute as an educational charity.'  

Conclusion:   The Commission concluded that it was legitimate for the trustees to invite the Home Secretary to speak on this subject.   However, against the background of previous public criticism and engagement with the Commission during the course of its Inquiry, the trustees did not take sufficient steps to manage the risk that this event would promote or be perceived to promote Government policy on a controversial Bill and at a critical time in the Parliamentary process. Options available to the trustees included postponing the event until the Parliamentary process has been completed, inviting additional speakers to the event to provide a balanced perspective or bringing forward planned subsequent events to provide this balance.

C: Did the Institute promote the aspirations of political figures?

120. As previously noted in this report, a charity can never engage in any form of party political activity. However it may be appropriate for a charity to publish the views of politicians where these views relate to the charity's purpose. Trustees must consider the impact of the range and scope of those views and how they are expressed, on the charity's overall work. How the public and others may perceive activities of a charity, and how they could be used for political or personal purposes, are difficult and sensitive issues. As part of their decision making processes the trustees should assess whether the views expressed present any risk to the charity's reputation and independence and if these outweigh the benefits to the charity.

121. The Inquiry examined the concern that the Institute was used to promote the political aspirations of the then Chancellor.

122. Having reviewed the Institute's website⁴⁵, the Commission identified 23 publications to which the then Chancellor contributed.

123. The particular risks this posed to the Institute's reputation and independence stemmed in part from the timing and content of some of its publications involving the then Chancellor. From 2004⁴⁶ it was anticipated that the then Chancellor was preparing for Labour Party leadership⁴⁷. Correspondingly the trustees' duty to manage those risks also increased at this point.

124. However, the Inquiry noted that, during this period, the Institute published more contributions relating to the then Chancellor⁴⁸.

125. The Inquiry found a number of publications published in 2004 and 2005 by the Institute promoted the then Chancellor's commitment to worldwide economic developments and his proposals for a 'modern Marshall Plan' for Africa. Two of the publications, One Moral Universe: The case for action on global poverty and Perspectives: Corporate Social Responsibility, include speeches given by the then Chancellor at events which were not organised by the Institute and which it chose to publish in 2004 and 2005⁴⁹. The Institute 'strongly disagree' with this assessment and say that 'the Smith Institute has no agenda of its own, and that it strives to maintain proper objectivity and balance at all times.'

126. The Inquiry also noted that in 2005 the Institute published the Enlightenment Lectures. This was a series of lectures, including an address from the then Chancellor, delivered in 2002. The Institute informed the Inquiry that delays in publication sometimes occur because 'it takes about a year to generate a publication and a four seminar series'. The Institute stated that the delay was prolonged in the case of the Enlightenment Lectures asthis was 'a classic example of us trying to do more than we are staffed up to do … it turned out to be  too complex a job for us to do within a reasonable timescale  and within our scant resources.'

127. The Institute also informed the Inquiry that it 'took absolutely no informal or formal part in the process operated by the Labour Party in the period 10th May 2007 to 27th June 2007⁵⁰.' The trustees further deny the concern that the Institute was used to further the then Chancellor's political aspirations.

128. The Inquiry also noted the Director's appearance on BBC's 'This Week' programme on 22 March 2007, the day after the delivery of the then Chancellor's last Budget statement. The programme, prior to the start of the studio discussion, included a short film focusing on the Director's friendship with the then Chancellor.  Mr Stevenson was captioned as 'Director of the Smith Institute' but he and the trustees informed the Inquiry that he had no control over the editorial process and that he had appeared in a personal capacity.

129. As a general principle, trustees are not responsible for the activities and conduct of staff, volunteers or others carried out in apersonal capacity.  However, in the context of the work and nature of the Institute, the activities and conduct of staff and others carried out in a personal capacity may well impact on the perceived independence and reputation of the Institute. It is the responsibility of the trustees to ensure they manage the risks effectively where their staff undertake activities in a personal capacity, in circumstances where there could be confusion that they are acting on behalf of the Institute. 

130. In the programme the Director stated:

'Over the last year Gordon Brown has been making a series of speeches across a range of different subjects and these contain important clues about what he would do when he becomes Prime Minister.

The thing is nobody has read them.

I think we'll see a continuation of the work that he's started in terms of trying to make sure that debt relief and investment is made for the poor in Africa and other developing countries, there'll be a lot more sustainability and more of a green agenda because that's started with the budget, and that will continue and an engagement with new politics as he calls it, a way of bringing people into the decisions that are made about services devolving power.'

In response to the Inquiry's concerns the Institute stated that within:

'the constraints of a live event, Mr Stevenson tried to restrict his answers to the personal character of the Chancellor, and the clues to possible future policy interests which can be derived from his speeches. At one point Mr Stevenson refused to comment on the 2007 Budget.'

Conclusion:   When the timing and content of some of the Institute's activities is examined, the Commission can see how the perception arose that the independence of the Institute had been compromised, and in particular that the Institute was focussing on or connected to the then Chancellor and his political aspirations.   The Commission concluded that, even if it was in a personal capacity, the Director's comments in the BBC's 'This Week' programme could have furthered the perception that the Institute's publications promoted the then Chancellor's political aspirations.   The trustees should have given consideration to these risks and managed them accordingly.  In the Commission's view the trustees did not adequately engage with these issues.   The Inquiry found no evidence to suggest that the then Chancellor had been involved in using the Institute to further his political aspirations.

Ed Balls' tenure as Senior Research Fellow

131. Ed Balls, now MP and Secretary of State for Children, Schools and Families, was employed by the Institute as its first Senior Research Fellow from July 2004 to April 2005. It was alleged that the Institute had created the post of Senior Research Fellow in order to provide him with employment following his resignation as Special Adviser to HM Treasury which was a prerequisite for his standing for election⁵¹. His employment with the Institute ceased following his successful election as Labour MP for Normanton.

132. The Institute stated that Ed Balls' knowledge and experience meant that many organisations were seeking to employ him and that he made a valuable contribution to the Institute during his time there. During his tenure at the Institute the work he undertook included: chairing 10 Institute events, speaking in his capacity as Senior Research Fellow at 5 events and editing and contributing to 6 monographs.  It is also relevant that the Institute's post of Senior Research Fellow, which Ed Balls held, has continued since his departure.

133. The Inquiry was informed by the Institute that no 'particular source or sources of funding were sought or arose specifically to cover the costs of the Senior Research Fellow posts, either generally or in relation to any particular occupant.'

134. On examination, the Inquiry was satisfied that no particular donations or funding streams were for the purpose of covering the Senior Research Fellow posts.

Conclusion   The Commission accepts the decision the trustees took to employ Ed Balls was taken in the Institute's interests and was a reasonable decision to take.   The Commission has no regulatory concerns about the employment or funding of Ed Balls as a Senior Research Fellow at the Institute.

Issue 4: Finances of the Institute

135. In view of the concerns which arose in the media, including that money was coming to the Institute in increasing amounts in the expectation that the then Chancellor 'will be in power within a year'⁵², and in light of the general principle that a charity cannot be used to fund political parties, the Inquiry examined the finances of both the Institute and its non-charitable trading company, SI Events Limited.

136. Following the 2002 commitments, accounts for the Institute were filed with the Commission for the financial years ended 31 March 2003 to 2006 inclusive. For these years, the Institute did not submit group accounts including those relating to SI Events Limited as recommended by Accounting and Reporting by Charities: Statement of Recommended Practice (“SORP”) 2005.

137. The Institute prepared consolidated accounts for the financial year ended 31 March 2007 which were filed with the Commission in time on 31 January 2008.

The Institute's income and expenditure

138. The Institute's income, based on filed consolidated accounts, was £755,135 for the financial year ended 31 March 2007⁵³. This can be broken down as:

- donations⁵⁴ £740,561 (98% of total income);
- membership charges⁵⁵ £11,476 (1.5% of total income); and
- bank interest £3,098 (0.5% of total income).

139. The Institute's accounts for 2007 indicate that the costs of charitable activity comprised 88.6% of total expenditure, with the balance utilised on the costs of generating income and governance costs.

Concerns about payments made to SI Events Limited

140. Concerns were raised publicly about the Institute's involvement in the Myners Review⁵⁶. This work was carried out by SI Events Limited, the Institute's non-charitable trading company. 

141. Payments totalling £11,750 were made by HM Treasury to SI Events Limited to hold two seminars on behalf of the Myners Review⁵⁷.

Conclusion:   The Commission does not have any specific regulatory concerns about SI Events Limited carrying out this work.

Funding of the Institute for party political purposes?

142. Concerns were raised publicly that funding to the Institute had increased in anticipation of the then Chancellor becoming Prime Minister.

143. On reviewing the Institute's income from the period since the 2002 commitment, the Inquiry noted that funding to the Institute and its non-charitable trading company had increased as follows: £463,200 for the financial year ended 31 March 2003; £524,852 for 2003/04; £718,031 for 2004/05 and £857,387 for 2005/06; and decreased to £755,135 for 2006/07.

144. The trustees denied to the Commission that funding to the Institute had increased in anticipation of the then Chancellor becoming Prime Minister. The Inquiry considered the funding of the Institute. None of the donors questioned during the Inquiry had classified their donations to the Institute as political in their accounts. The Inquiry found no evidence of funds being transferred from the Institute to any political organisation.

Conclusion:   The Commission concluded that there was no evidence of donors giving funding to the Institute for party political purposes.

Issue 5: Governance of the Institute

Role of trustees

145. When assessing the governance of the Institute the Inquiry considered:

a) trustee meetings;
b) the trustees' supervision and oversight of work of members of staff and the Senior Research Fellow;
c) the role of the Advisory Committee; 
d) the use of SI Events Limited; and
e) the management of risks including those to the Institute's reputation.

146. Trustees are responsible for the general control and management of the administration of a charity⁵⁸. It is acceptable for trustees to delegate day to day management of a charity to staff and others. However, charity trustees must always retain the ultimate responsibility for running the charity. 

147. Notwithstanding the size of the Institute, the trustees are under a duty to manage and supervise the activities carried out in its name adequately and to ensure they monitor and oversee the way in which their delegated powers are exercised. This includes events that are held in conjunction with third parties. The Inquiry looked into concerns about the extent of the trustees' supervision of the Institute's work.

148. The trustees informed the Commission that they manage the Institute in the following way:

'As well as deciding on the programme of the Institute, the Trustees maintain a watching brief on all aspects of its work through formal meetings and informal discussion with the Institute staff. The trustees also regularly attend the Institute's seminars and events. It is rare for the Chairman to miss one.'

149. The Institute has informed the Inquiry that:

'They [the trustees] are also very busy volunteers, who do not have (or need to have) detailed knowledge of every aspect of the work of the Charity.'

150. The trustees' view is that the Institute is a small charity and that, given the resources available and the ambitious work programme, they cannot be expected to supervise and manage every activity the Institute runs.  However, the trustees maintain that they still exercise ultimate control over the Institute and fulfil their statutory duties as trustees. 

151. Based upon income, the Institute falls within the top 4% of registered charities and unlike many charities it is able to employ staff. In addition the Institute's governance arrangements must be able to cope with the higher public profile that it has  compared to most other charities of a similar size, due to:

a) the political environment in which it works; and

b) its association and interaction with prominent figures.

Trustee meetings

152. Trustees must meet as often as needed to do justice to the affairs of the charity, and make well-informed decisions. Trustees who do not meet often enough risk breaching their duty of care⁵⁹.

153. The trustees hold on average two formal meetings a year⁶⁰ and have informal contact with each other between meetings. 

154. The Inquiry found that the trustees' decision making process was unclear because the minutes of the trustee meetings lack the detail necessary to demonstrate the way decisions were made. The trustees have accepted they could do more to document the way they make decisions.

155. The Institute informed the Inquiry that:

'Following the discussion with the Commission in 2001/02, the Trustees set out three key questions which they have since asked themselves at all their meetings. These are:

• Is the Institute performing its role as an educational charity?
• Is the Institute promulgating a single point of view?
• Is the impression given to the public that the Institute is part of, or close to, the Labour Party?'

However, the minutes of the trustee meetings do not reflect that this happened in practice.

156. The Inquiry found that the trustees do try to ensure that at least one of them attends each Institute event. However, the trustees did not use trustee meetings to report back on these events so that any risks and concerns identified at events could be actively and promptly managed.

Conclusion:   The trustees of the Institute were not sufficiently engaged to ensure the proper supervision of the charity, given the nature of its activities, work programme and the political environment in which it operates.

Supervision of staff and Senior Research Fellow

157. The Institute employs four members of staff including the Director. The Director is responsible for the daily running of the Institute. In addition the Institute periodically uses the services of a Senior Research Fellow who provides advice and guidance on the research programme and participates in events⁶¹.

158. As noted above, the trustees informed the Commission that as well as deciding on the programme of the Institute, they maintain a watching brief on all aspects of its work. In practice, the Inquiry found that the Director had almost total executive responsibility to co-ordinate and deliver the educational programmes of the Institute and to control its other operational activities. 

159. Where trustees delegate decisions on day to day management matters to members of staff, the authority should be clear and instructions given for decisions on important matters to be reported to the trustees, including those affecting the charity's reputation and independence. Trustees should establish proper reporting procedures and clear lines of accountability.

Conclusion:   The Commission concluded that there was little evidence of adequate procedures being in place to define lines of accountability and demonstrate the way in which the trustees were overseeing the work of the Director and his staff.   In the Commission's view this failing was a significant contributory factor to the difficulties the Institute has experienced, as outlined in paragraphs 90-92, 128-130, 162 and elsewhere.   Going forward:   During the closing stages of the Inquiry the trustees informed the Commission that they have now adopted 'more formality of oversight', including the creation of a Deputy Chair role and Audit Committee.

160. In addition, the Inquiry was concerned about the lack of supervision exercised over the work of its Senior Research Fellow.  For example, Robert Shrum led two events in 2006⁶² which did not further the Institute's charitable purpose.  The first of these is discussed in paragraphs 91 and 92, which the Inquiry found contained material which was party political and therefore inappropriate for the Institute to carry out. 

161. The second, The Midterms: Mid-course Corrections and Long Term Consequences, did not further the Institute's charitable purpose, as it did not concern the economy of the United Kingdom.  

162. The Inquiry was informed that the trustees try to ensure that at least one of them attends every Institute event. The Director and the trustees failed to raise any concerns with Robert Shrum that his contributions did not fall within the Institute's charitable purpose. On neither occasion did the Director, trustees or the Advisory Committee review or agree to the content of these events or take sufficient steps to ensure that Robert Shrum fully understood the charitable parameters of his role and the Institute's work.

Conclusion:   The trustees did not ensure that the Director was properly supervising the work of the Senior Research Fellow, Robert Shrum.

Supervision of Advisory Committee

163. As a result of the Commission's previous engagement with the Institute the trustees established an Advisory Committee in 2002 to advise the trustees on the selection of areas of study and research, and the formulation of a structured means of deciding which topics should be chosen (see paragraph 40). The Inquiry considered the composition and role of the Advisory Committee and is satisfied that its members are suitably qualified experts to achieve this objective.

164. However, for the Advisory Committee as a whole to operate successfully the trustees must be clear about its purpose and remit and communicate this to the Advisory Committee.

165. The Institute provided the Inquiry with differing accounts of the Advisory Committee's role and remit, some of which contradicted what the Commission had been told during its 2001/02 engagement with the Institute. The Commission's original understanding in 2002 of the role of the Advisory Committee was that it would provide the trustees with independent and expert advice about the subject matter of the Institute's programme of seminars, conferences and events. It would also help ensure that the topics chosen and events held advance education for the benefit of the public. The Advisory Committee would also comment on publications.

166. The Inquiry contacted each of the 13 members of the Advisory Committee and also spoke in more detail to four members.  The Inquiry was not satisfied that the Advisory Committee members had been given sufficient information by the Institute to fully understand the nature of their role.

167. The Inquiry found that letters issued by the Institute to prospective members did not provide enough information about the Institute and the role of the Advisory Committee. The omission of any reference to the Institute's charitable status and any associated guidance on this fundamental point was particularly concerning.

168. The Inquiry also found that members of the Advisory Committee had different views on whether it was their role to assess whether or not the Institute's educational programmes were capable of furthering the charitable purpose of the Institute. A number of them emphasised that their role was purely advisory and they were not the trustees of the Institute. The Commission agrees that members of the Advisory Committee do not have the duties and responsibilities of the trustees.  It was clear to the Inquiry that members of the Advisory Committee had all willingly made their expertise available at no cost to the Institute. However the Inquiry found that the Institute had not maximised the potential of this resource.

169. The Inquiry noted that:

169.1 the Advisory Committee meets only annually. Since its inception in 2002 through to its meeting on 13 March 2007, only five members have attended more than two meetings;

169.2 in the minutes of their meetings there is little discussion as to whether projects are suitable for the Institute to take forward or whether proposals fall within the Institute's charitable purpose. The Committee also rarely considers how individual seminars/events fit appropriately within the wider strands of the Institute's educational work;

169.3 the Advisory Committee as a body does not review the actual content of the work subsequently produced by the Institute;

169.4 although the trustees receive minutes from the annual Advisory Committee meeting, there is no formal discussion or reporting through which the trustees can explore the Advisory Committee's perspective on the Institute's programme of work; and

169.5 the Advisory Committee had informal contact with the trustees and some members were involved in Institute events.

170. It was the trustees' responsibility to ensure that the Advisory Committee was properly managed and that its members were aware of their roles.

171. The trustees accepted that 'there is a degree of uncertainty as to precisely what the Advisory Committee does and should do' and has taken steps to address this in the future.

Conclusion:   Having established an Advisory Committee with a broad spectrum of suitably qualified members, the trustees did not use the Advisory Committee in a way which fully achieved its intended purpose.     Members of the Advisory Committee were not adequately informed about the nature of their role or of the intended purpose of the Committee. As a consequence, there was a lack of understanding on the part of the Advisory Committee's members that its function was to determine whether material was of educational value and merit.  Not all of the Institute's educational work was reviewed by the Advisory Committee.   Going forward :   During the closing stages of the Inquiry the Institute informed the Commission that it had 'agreed changes in the role and function of the Advisory Committee'.

Management of risks including those to the Institute's reputation

172. In every charity, trustees are responsible for setting that charity's strategic aims, objectives and direction. Identifying the risks arising from its activities, and managing those risks, is important in ensuring that the charity achieves its strategic aims and objectives⁶³.

173. The Inquiry saw little evidence⁶⁴ that the Institute regularly and actively assessed and managed the risks arising from its activities. For instance risks relating in particular to public perception about its independence and the inevitable risks flowing from the nature of the Institute's work in an environment close to the party political arena.

Conclusion:   The trustees did not adequately manage the risks to the independence of the Institute and its reputation.    Going Forward:   The trustees confirmed that, as a result of the Commission's interaction with them, they had identified areas for change and improvement and that they had particularly been alerted to the importance of a risk management strategy. During the closing stages of the Inquiry the trustees established a risk audit committee.

Conclusions

174. In summary, the Inquiry reconfirmed that the Institute is a charity and is capable of operating for the public benefit.

175. Further, the Inquiry found that the Institute is producing work which falls within its charitable purpose, is of educational value and is freely available to the public.

176. However, the Inquiry found that the trustees had allowed the Institute to become exposed to concerns that it supported Government policy and was involved in party political activity inappropriate for a charity.  The trustees did not adequately manage the risks to the independence and reputation of the Institute.

177. In particular, the Inquiry found that:

• the trustees took some positive steps to implement the commitments given to the Commission in 2002. They have further agreed to review the diversity of the trustee body. However, concerns remain over the Institute's frequency of use of 11 Downing Street and over the review and monitoring of the impartiality of its educational programmes, which the trustees chose to do through establishing an Advisory Committee to guide them. This exposed the Institute to renewed concerns about its lack of political neutrality. (See paragraphs 38-42);
• the educational work of the Institute was acceptable in most instances, both in terms of its subject matter and value consistent with its charitable purposes, and it was widely accessible. However, there are a number of instances where the balance and neutrality of the Institute's work were compromised by a party political association. (See paragraphs 43-65); 
• given the environment in which the Institute operates, the trustees should have been exercising vigilance to ensure political neutrality in the work of the charity⁶⁵. Sufficient steps had not been taken to identify or manage the perception that the Institute was unacceptably linked to and supported the Labour Party or that it inappropriately promoted Government policy. (See paragraphs 66-134);
• it is also understandable how the perception arose that the Institute was focussed on or was connected to the then Chancellor of the Exchequer. However, there is no evidence to suggest that he had been involved in using the Institute to further his political aspirations. (See paragraphs 66-134);
• there was no evidence of donors giving funding to the Institute for party political purposes. (See paragraphs 142-144); and
• the trustees had not been sufficiently engaged to fulfil their duties and responsibilities to oversee the Institute, and supervise its work programmes, its staff and use of the Advisory Committee. There are a number of areas for improvement in the Institute's governance. (See paragraphs 145-173).

178. Steps recently taken by the Institute's trustees and further steps now required of the trustees by the Commission are set out below.

Regulatory action taken during the course of the Inquiry

179. Directions were issued using powers under section 8 of the Act to the Advisory Committee members to gather information on their understanding of their role, the operation of the Committee and the extent of their involvement in the Institute's work.

180. A direction was issued under section 8 of the Act to a complainant to obtain further evidence that they claimed to hold. The complainant's response re-iterated earlier concerns and referenced previously published and publicly available information. Therefore, the response from the complainant did not provide any further information to assist the Inquiry.

181. Directions were issued under section 8 of the Act to a number of the Institute's funders to clarify the nature and purpose of their payments.

182. Using powers under section 9 of the Act the Commission issued orders to obtain copies of the bank statements for the Institute and SI Events Limited. The Commission also used this power to obtain a sample of copy cheques from the Institute's and SI Events Limited's bankers.

183. The Commission used its powers under section 19A of the Act to make a direction that the trustees now implement a number of actions, within certain timescales, and report to the Commission on progress as specified (see paragraphs Actions Required of the Trustees.) 

184. A compliance visit will be conducted in a year's time to ensure that the actions have been fully implemented and to review their impact. This should provide enough time for the trustees to properly consider how they will implement the required actions and ensure the direction is complied with.

Developments since the Commission's intervention

185. Since the Commission engaged with the Institute in November 2006, the trustees have:

185.1  ceased to operate its non-charitable trading company, SI Events Limited. (See paragraph 12);

185.2  started to include a disclaimer on Institute publications which states that the views expressed represent the views of the contributor or speaker and are not those of the Institute. (See conclusion following paragraph 92);

185.3  filed consolidated accounts with the Commission. (See paragraphs 136-137);

185.4  adopted more formality of oversight including the creation of a Deputy Chair role and an Audit Committee. (See the conclusions following paragraphs 159 and 173);

185.5  agreed changes to the role and function of the Advisory Committee. (See conclusion following paragraph 171); and

185.6  included a statement with regard to the Institute's charitable status on its publications.

186. In addition, the Institute has informed the Inquiry that it will:

186.1 'appoint at least one trustee with public allegiance to each of the main opposition parties…. [as this would] beneficially affect the perception of partisanship.' (See paragraph 38.4);

186.2  reduce its use of 11 Downing Street. (See paragraph 42);

186.3 formulate a statement to make it clear to beneficiaries when a particular event or publication forms part of a wider strand of work. (See paragraphs 54-56);

186.4  give a clearer steer in their briefings of speakers to protect the Institute's position, as a charity, from being compromised. (See conclusion following paragraph 89); and

186.5  do more to document the way the trustees make decisions. (See paragraph 154).

187. The trustees are required to implement a number of actions, as set out under a direction under section 19A of the Act within the timescales prescribed (see paragraphs Actions Required of the Trustees below).

Actions required of the Trustees

188. The trustees must implement a number of actions, as set out under a direction under section 19A of the Act within the timescales prescribed.

189. On 16 July 2008 the trustees were directed to carry out a governance review of the administration and management of the Institute, which must include:

189.1  the constitution of the trustee body to safeguard its political independence as a charity and to ensure that the Trustees have the time and ability to carry out their duties effectively;

189.2  the delegation of authority to and the supervision of staff, in particular the Director and the Senior Research Fellow, including, in particular, the establishment of clear and adequate lines of staff accountability and supervision of work to ensure that staff fully understand the charitable parameters of their role and the Institute's work;

189.3  the establishment of procedures to ensure that the trustees are sufficiently engaged in supervising the Institute's current and proposed educational research programme and specific activities (to include all round-table meetings, seminars, lectures, publications) to ensure that these are in furtherance of the Institute's charitable purpose and to ensure its political neutrality;

189.4  the content of the strands of work and the presentation of material in the Institute's current and proposed educational research programme and specific activities (as referred to in paragraph 189.3 above) planned within such strands to ensure that these are in furtherance of the Institute's charitable purpose and to ensure its political neutrality;

189.5 all procedures relating to the briefing of speakers to ensure that they are aware of the Institute's charitable status, charitable purposes and of the factors which they must consider, and are relevant to the need for their contribution to be educational in accordance with the Institute's charitable purpose and politically neutral;

189.6  developing a risk management strategy and carrying out a risk assessment of the Institute's operations and the way it carries out its educational programmes, including  the risks of using venues close to or associated with the political environment; and

189.7  the terms of reference, operation and supervision of the Advisory Committee.

190. The trustees are required, under the direction, to report to the Commission at six months on a) progress on the review itself and b) on the decisions the trustees have taken following the review to implement necessary and/or appropriate steps arising from the review.  The trustees are further required by the direction to complete the review within one year (or at such other time agreed by the Commission).

191. Further actions may be required of the trustees in the future depending on the outcome of the governance review.

Resources applied

192. The Commission adopted a multi-disciplinary team working approach on this case both before and during the Inquiry. The team consisted of investigators, lawyers and accountants. The Commission, as a non prosecuting body, does not record the full costs of each inquiry. However, due to the scope and complexity of this case the resource applied was significantly greater than average.  Due to the nature of the issues under consideration each member of the team was asked to declare any potential conflicts of interests. No conflicts were declared.

193. The review of a sample of the Institute's work carried out by the independent expert cost the Commission £4,406 (including VAT).

Issues for the wider sector

194. This section identifies issues arising from the Inquiry which may be of interest to the wider sector.  This section of the report is framed around the five issues identified at the start of the Inquiry (see paragraphs 32-37).

Commitments given to the Commission as regulator

195. The Commission is a risk-based and proportionate regulator. This means the Commission engages with charities in a way which will make most difference to them and those who benefit from them. Any regulatory action we take will be evidence based and proportionate, fair and reasonable, taking account of the issue, the risk involved to the charity and its beneficiaries and the capacity of the charity to comply. The Commission expects trustees to make conscientious and continuing efforts to ensure that they resolve the issues that have already been raised with them by the Commission.  Where a previous commitment has been given, the Commission will view non-compliance as a serious concern⁶⁶.

Educational work

196. Trustees have a fundamental responsibility to ensure their charity's activities further their charitable purpose. As part of an ongoing risk assessment trustees should regularly re-evaluate the charity's work, consider whether its activities successfully fulfil the original aim and if the work furthers their charity's purpose.

Charities involvement in politics and political activities

197. Trustees of educational research charities which work close to the political environment should pay particular attention to the inherent risks associated with the nature of the work they undertake. These charities cannot be involved in directly promoting government policy for political advantage, the policies of a particular political party, or be involved in party politics in any way. They must ensure the political neutrality of the work they do. This means that a charity cannot champion or otherwise support the Government, one political party and/or discredit another. It may express support for particular policies which will contribute to the delivery of its own charitable purposes as long as the charity's independence is maintained, and perceptions of its independence are not adversely affected⁶⁷.

Finances

198. Although it was not the case with the Institute, a charity must not give financial support to a political party, nor to a candidate or politician.

Governance

199. Charity trustees have an important role to play in society and almost always act in a voluntary capacity.  A prospective trustee should consider the general duties and responsibilities of being a trustee⁶⁸. The needs of individual charities may vary and trustees must ensure they are able to commit sufficient time to ensure the charity is managed properly and appropriately. Before making a commitment to become a charity trustee, individuals should ensure they understand what is required of a trustee for that particular charity and be able to commit sufficient time to ensure the charity is supervised and managed appropriately.

200. It is open to trustees to delegate the day to day management of their charity. However, they retain ultimate responsibility and accountability. Trustees must ensure they have established clear lines of accountability and should have a formalised method of monitoring the work of staff and volunteers.

Annex 1: Educational material examined

A More Equal Society? New Labour, Poverty, Inequality and Exclusion 3: Economic Issues
Published 2006

Building Consensus – The Reform of Public Services
(Transcript) July 2006

©8 – Capitalising on Creativity (New Statesman publication)
Published 2005

Carnegie and Philanthropy: Lessons for Today
Published 2004

Centre Ground or Common Ground – Progressives in the New Political Landscape
(Transcript) March 2006

Civilised Capitalism
Published 2004

China and Britain: The Potential Impact of China’s Development
Published 2005

Communities Social Exclusion and Crime: Seminar 1: Social Exclusion and Crime Prevention
Published 2007

Community Leadership and Public Health: the role of local authorities
Published 2004

Competitiveness: A series of three seminars
Published 2003

Consumer Power
Published 2005

Copyright Reform in the Digital Age – A roundtable discussion on music industry rights (New Statesman Publication)
Published 2006

Creative Nation: advancing Britain’s creative industries
Published 2006

Economic Nationalism
Published 2007

Educating for Creativity – The role of private-sector business (New Statesman Publication)
June 2006.

Enlightenment Lectures 2002
Published 2005

The Future Wealth of Nations: Spreading links between business and the community
Published 2003

Globalisation and Progressive Politics
Published 2006

Going for Growth: Science, Technology and Innovation in Africa
Published 2005

The Green Shift: Environmental policies to match a changing public climate
Published 2006

Growing the Economy: The Local Dimension
Published 2003

John Smith Memorial Lecture
A lecture by Rt. Hon. Margaret Beckett MP, (Transcript) March 2007

John Smith Memorial Lecture: Religion and the rise of socialism: the ethical origins of the Labour Party
A lecture by Rt. Hon. Lord Hattersley of Sparbrook on 12 July 2004

The Midterms – Mid-course Corrections and Long Term Consequences
(Transcript) December 2006

More Homes for Rent: stimulating supply to match growing demand
Published 2006

New Challenges to Security
(Transcript as yet unpublished by the Institute) but concerning an event held on 3 June 2008
 
New Statesman 2004 Media Lecture
Lecture delivered on 7 December 2004

One Moral Universe: The case for action on global poverty
Published 2005

Perspectives: Corporate Social Responsibility
Published 2004

Public Service Reform 2006-2010
Published 2006

Science and the Economy
Published 2006

Smart Localism
Published 2005

The Smith Institute Arts Lecture – Arts in the core script- writing ourselves in (New Statesman Publication)
Published July 2006

The Smith Institute Media Lecture: Delivering Public value – The BBC and public sector reform (New Statesman Publication)
Published October 2006

Starting Them Young: Creating a culture of enterprise for all
Published 2004

Taking Corporate Social Responsibility Forward: Seminar 1: Where now for CSR?
A seminar held on Wednesday 1 November 2006

Telling It Like It Could Be: The Modern Force of Progressive Politics
(Transcript) March 2005

Towards a Progressive Consensus – Progressive Policies
(Monograph) January 2005

Transforming Britain – The Modern Politics of Progressive Reform
(Transcript) November 2005

The Wealth of the Nation: Seminar 1: The Creative Industries.
A Seminar held on Wednesday 22 November 2006

Whose Responsibility? – the role of business of delivering social and environmental change
Published 2006

Lecture Attended

Does Britishness Really Matter in the 21st Century? And, if not, what?
January 2008

Annex 2: Conduct of Inquiry

The Inquiry examined the organisation, activities and management of the charity. This included:

1. A detailed analysis of samples of material produced by or on behalf of the Institute, including: publications, statements, transcripts, reports, evidence of meetings, and correspondence by and from the Institute.  Specific criteria were referred to in order to establish whether these and the strands of work they represented could be educational in the charity sense. Due to the extensive range and volume of work undertaken by the Institute, it was neither proportionate nor appropriate to review every activity and document; instead representative material was selected.

2. A list of the material considered by the Commission can be found in Annex 1. It included:

a. two major programmes of work conducted by the Institute, The Creative Industries and Progressive Consensus;⁶⁹

b. supplementary material proactively provided by the Institute;

c. publications which became of regulatory interest during the course of the Inquiry; and

d. materials available on the Institute’s website as of March 2008, published since 2002 (after our previous engagement with the Institute), in which the then Chancellor either spoke at an event or contributed to a publication.

3. In light of the specialist nature of the work, the Commission conducted a tendering exercise to identify an independent expert to carry out an assessment of some of the selected material, which the Commission would consider alongside its own initial findings. CRG Research Limited (“the independent expert”), a Cardiff based consultancy company, was commissioned to undertake this work.

4. The Inquiry also involved:

a. meetings with the Institute⁷⁰ and the Advisory Committee. This included:

i. some of the Advisory Committee’s members in order to seek clarification of its purpose and role. The Commission issued directions using its powers under section 8 of the Act to ask each member of the Advisory Committee certain questions to clarify certain matters;
ii. the Institute (the Director and some of the Institute’s trustees and its legal advisers);
iii. the charity’s auditor and Director in order to seek clarification of the charity’s governance structure, finances and relationship with the trading subsidiary company.

b. contacting Rt Hon Margaret Beckett MP, Rt. Hon Jacqui Smith MP, John Healey MP and Robert Shrum (political strategist) to clarify the Commission’s understanding of their involvement in, or comments relating to, certain events of the Institute;

c. contacting the Rt Hon Gordon Brown MP⁷¹ and the Rt Hon Ed Balls MP to offer them the opportunity to comment upon the Commission’s findings.

d. an assessment of the party political affiliation of the charity to Government policy and the Labour Party in general, and of contributors to various events and publications. Links between the charity’s activities and contemporaneous political events were also investigated;

e. contacting a sample of individuals who had participated in the Institute’s events to survey their view/perception of the purpose and content of them;

f. contacting other government departments to obtain an understanding of their involvement and/or interaction with the Institute;

g. an analysis of the charity’s accounts. The Commission issued directions to a selection of donors to understand the purpose of their donations, their understanding of the Institute’s charitable status, and where donors were organisations, the method by which donations were recorded in their accounts; and

h. using powers under section 9 of the Act to obtain copies of bank statements and copy cheques.

5. When considering the above aspects, the Inquiry examined:

a. the governance of the Institute;

b. the role of the Institute’s Advisory Committee;

c. a sample of the Institute’s activities (see Annex 1 to determine whether they fall within the Institute’s charitable purpose and the framework of charity law);

d. links between the Institute’s activities and contemporaneous political events such as the perceived links between EMI, a policy announcement by the then Chancellor about the enforcement of copyright law and a seminar organised by the Institute;

e. political overtones of the work undertaken and seminars conducted by or on behalf of the Institute;

f. connections between the Institute, Government policy, the then Chancellor, Gordon Brown MP and the Labour Party;

g. the Institute’s regular use of 11 Downing Street as a meeting venue;

h. the conduct and management of the Institute, including specific events such as:

i. the Director’s appearance on the ‘This Week’ programme and his comments made therein;

ii. the employment of Ed Balls by the Institute for research work during the period following his departure from HM Treasury and prior to his election as an MP; and

iii. the commissioning of a review by Paul Myners on the instructions of the then Financial Secretary to HM Treasury, Ruth Kelly MP, into the corporate governance arrangements applicable to mutual life offices, (“the Myners Review”). This included examination of payments of £11,750 by HM Treasury to SI Events Limited to hold two seminars on behalf of the Myners Review.

i. the source and use of funding by the Institute, including the motivation of its funders and their understanding of the Institute’s status as an educational charity.

 

Footnotes

1. The Institute describes itself as 'an educational charity and it strives to ensure that as many people as possible can understand better the process of policy formulation. We usually work with partner organisations and our aim is to identify where the most relevant and recent research is being undertaken on a particular topic, and then to present it at a seminar series attended by ministers, back-benchers, special advisers, civil servants, business and trade union leaders, and specialists' - Join the Smith Institute pamphlet
2.  As of 13 May 2008 the Institute has held nearly 400 public meetings and published nearly 70 monographs and other publications
3. Lord Elder was appointed a trustee on 30 April 2008 whilst Baroness Ramsay of Cartvale and Baroness Rendell of Babergh recently resigned
4.  The current Senior Research Fellow is Dr Irwin Stelzer. This position has also been held by Ed Balls (July 2004-April 2005) and Robert Shrum (September 2005-April 2007)
5.  Provisions within the version of the guidance Political Activities and Campaigning by Charities (CC9) available in 2002 included:
 'a)  A charity whose stated purposes include the advancement of education must not overstep the boundary between education and propaganda in promoting that purpose. The distinction is between providing balanced information designed to enable people to make up their own mind and providing one-sided information designed to promote a particular point of view (paragraph 33);
b)  A charity must not support a political party (paragraph 41);
c)  A charity must not provide supporters or members of the public with material specifically designed to underpin a party political campaign or for or against a government or particular MPs (paragraph 46); and
d)  A charity must not issue material which supports or opposes a particular political party or the government (paragraph 47)'
This publication was subsequently revised in 2004 and 2008, however the principles detailed above remain the same
6.  It was known to the Commission, at the time of registration, that the three founding trustees were all Labour Peers. When the Commission engaged with the Institute in 2001/02, the trustees at this time were still all Labour Peers. They were Lord Haskel, Lord Joffe, Baroness Ramsay and Baroness Rendell. In a letter to the Commission dated 9 October 2001 the trustees said that they wished 'to make it clear that they believe themselves to be independent of the Labour Party in their capacity as Trustees of the Smith Institute. However, they are happy to expand the number of Trustees, so that a wider range of backgrounds and interests are thereby represented, and so as to continue to ensure that the Trustees have adequate arrangements in place for the commissioning, control and evaluation of the activities of the Institute'
7.  Bloomberg News
8. The Daily Telegraph, 25 November 2006 'Brown forms Government in waiting'
9.  The Mail on Sunday, 10 December 2006 'Brown's copyright crackdown comes as EMI helps fund his political allies'
10.  EMI Group Ltd (formerly EMI Group Plc)
11.  The events were entitled ©8- Capitalising on Creativity and The Wealth of Nation: Seminar 1 : The Creative Industries
12.  Both events formed part of the Cre