July 2016 newsletter – Reforming the Society’s constitution

The forthcoming retirement of Mark Robson as the Society’s Honorary Treasurer was announced in the April Newsletter. In his time as treasurer Mark did a lot of work to enhance the Society’s constitution. To mark the Society’s appreciation of those efforts, the editor invited Mark to explain the thinking.

Ed: Most readers will know you were not only the Society's Honorary Treasurer but also that you did a lot of additional work in revising the Society’s constitution. How did you come to take that on?

MR: My good friend John Vickers invited me to lunch one day when he was President. I should have known something was up. He explained that John Beath was just getting into his stride as a very active new Secretary-General and needed support from a new Treasurer as Penelope Rowlatt was standing down. Would I be prepared to consider it, on a strictly honorary basis but unlikely to involve much regular effort, and even if it involved an election (for full transparency and a legitimate mandate)? As I find it hard to say no whenever anyone asks for help, I readily agreed and was duly elected. One of my commitments was to update the constitution so that it would be fully fit for purpose.

Ed: I gather that you’ve helped other organisations in this quasi-legal role. Why? It seems a rather arcane pastime.

MR: About twenty-five years ago it became clear that the constitutional model (what we now call governance) generally favoured by the Charity Commission in the 1960s was not working effectively. The formal governing body was typically a very large Council, of 30-40 strictly disinterested members able to represent a wide range of interests, but too unwieldy to meet often and exercise effective management and control. Too much was left to chance and trust. In consequence things had gone wrong, such as major frauds by unsupervised managers, or were at high risk of going wrong in too many charities. New legislation to facilitate change was introduced in 1992 and consolidated the following year. I had been a trustee of several educational charities including some I had set up from scratch and became interested in this practical application of the principal/agent model. There were two ways forward: first, to retain the Council as the governing body but shrink it to a manageable size and make its members clearly accountable for all the charity’s activities. In the university sector this approach was pioneered by Salford University and then City (where I was on the Council before and after reform). The second was to retain a large Council as an advisory body meeting perhaps only annually, but establish a much smaller Executive exercising effective management and control. This is what we did with the RES and with the Institute for Fiscal Studies, for example. The difference between those two cases is that, unlike the IFS, for the Society we took advantage of the relaxation of the old rule that charity trustees should be completely disinterested. We are able to reflect in our Executive Committee the fact that management and control of the Society truly lies with a combination of officers and volunteers (who must remain in the majority). So far this has proved to be a highly effective model.

Ed: Are you an economist by training or did you come to this role with a legal background.

MR: I was very fortunate to be able to ‘convert’ to economics (my first degree was Mathematics and Philosophy) by taking the MPhil in Oxford in the 1980s with the benefit of a civil service bursary and then joining the government economic service. But although I am not a lawyer, before that I had a lot of experience of tax law while working for the Inland Revenue. I also qualified as an accountant, which has often proved useful.

Ed: What were you concerned about when you were reviewing the Society's behaviour as a charity? I heard it said that ‘size’ was an issue and that the RES was getting to a size where the Charity Commissioners were likely to take a close interest. But maybe there were other considerations?

MR: I wasn’t too concerned about any particular aspects of behaviour, just that we should have a governance model that was fully fit for purpose given that the RES management model is highly decentralised and largely virtual (with no employees). We also have a concentration of risk in the Economic Journal and conference activity, given their importance to the Society reputationally and financially, so that close and regular scrutiny is important. With a turnover exceeding £1mn the RES certainly does count as a larger charity, but I don’t think one that is ever likely to attract close interest from the Charity Commission for that reason alone. But if something should go seriously wrong that would be a different story and a very embarrassing one. I’m very pleased that under Charlie Bean’s Presidency we established the strategy working groups to think about the longer term.

Ed: In recent years issues have often been raised in the media about the legitimacy of charitable status — it’s too wide, too many organisations take advantage of it etc… Its use by public schools, for example, has sometimes attracted adverse comment. Do you have a view?

MR: The big issue has always been what is ‘public benefit’. The basic approach has not changed since 1601 when four heads of charitable purpose were established in the first charitable statute. The advancement of education and of religion were presumptively of public benefit and that was never contentious until very recently. Interestingly the relief of poverty did not historically have to be public: it could be just for the elderly and distressed members of one’s own family, for example. Then the fourth head was everything else of public benefit — what we would recognise as private expenditure on public goods such as roads, bridges, watercourses, flood defences and so on. Ed Balls modernised this basic framework to a longer list of purposes that is still not exhaustive, but must demonstrably include public benefit. That has been the contentious issue for public schools but the courts have provided useful guidance. Conversely of course some very worthy organisations are excluded from charitable status because of political campaigning, Amnesty International being one of the best known.

Ed: Future plans? I note your address is now the Centre for Central Banking Studies, while I think you were at the Bank's Notes Dvivision when you took on the RES Treasurer's role. Is there any significance in that? Being at the CCBS suggests maybe a more 'academic' interest. Many readers will recall the work of Max Fry and Peter Sinclair at CCBS and will be interested that you've moved there.

MR: I was indeed in the Notes Division when I became Treasurer, with three responsibilities: renegotiating the Bank’s contract with De La Rue for its own note production; devising a new legal and operational regime for the Scottish and Northern Ireland note issuing banks; and being part of the small team that created the quantitative easing regime. Then I had six stimulating years running and expanding the statistics function, to include regulatory data after the PRA was formed. Now I am helping out in CCBS, principally in assembling the new central banking MSc qualification with Warwick Business School, who will start teaching it to our graduates this autumn. So that is a bit more of an academic interest! But having suffered health problems recently I am thinking about retirement before long. It is so easy to take good health for granted.

Ed: I’m sure our readers and all the Society’s members will want to thank you for your efforts in a very important, but less than glamorous, role. I can certainly recommend semi-retirement and hope with everyone else that your health improves.