Rich donors’ hefty cheques will never solve poverty
It’s good to give, of course it is. Sir Tom Hunter this week announced that he is giving away £1bn over his lifetime. Compare that with the world’s richest man, Carlos Slim Helú, who says he won’t be giving away his £33bn fortune: ‘Poverty isn’t solved with donations – my concept is to accomplish and solve things, not going around like Santa Claus.’
Sir Tom is not altogether typical: in Britain, the rich give a lower proportion of their wealth than others, with more donors in the north east than the south east, and more women than men. The total value stays pretty steady at 0.9% of GDP.
A few weeks ago I joined a breakfast in the Mansion House organised by the Charities Aid Foundation (CAF) for ‘high net worth’ individuals. They were being urged to give by a high-flying City philanthropist. ‘I want to talk not about what we can do for charity, but what charity can do for us,’ was his pitch. It was a fascinating insight into the thinking of the helicopter owners. What do you do, he asked, ‘once you’ve got all the toys?’ Now you’ve got the many homes, yachts, jets and cars, what then? Not only is there the joy of giving, but ‘you meet celebrities and you get invited to places I’d never have seen otherwise’. He listed eye-popping names and places his philanthropy had taken him, from No 10 upwards. A modest man whose brush with death turned him to philanthropy, it wasn’t his motivation but he plainly reckoned this was the best pitch to persuade the other ‘high net worths’.
Gordon Brown has encouraged giving with new tax breaks. If the rich tire of one of their homes, which has no doubt risen vastly in value, they can give it to charity and pay no capital gains tax. Ditto any shares they donate. CAF’s expert in rich givers notes it tends to be the same few philanthropists’ names recycled in the press over and over again. Indeed, CAF’s annual report notes ‘a fall in the proportion of high-level donors’ according to records on users of tax breaks.
But are tax breaks a good idea? All that capital gains tax would otherwise go into the exchequer to be spent according to the democratic decision of taxpayers. Instead the taxpayer sees their own money purloined and spent at the whim of the giver. Every time anyone donates to a cat sanctuary or cruelty to dogs in Japan, the taxpayer is obliged to contribute another 28% on top, willy-nilly (and often nilly). So long as they fulfil the very basic requirements of probity, registered charities may cover a multitude of crankiness and inefficiency: cut-throat wasteful competition between near-identical tin-rattlers, advertising campaigns that distort important social issues; or empire building charity managers with little genuine assessment of their outcomes. Of course many are excellent, but, good or bad, the taxpayer has to pony up that 28% extra for every pound put in a tin.
Donors with their hefty cheques can cause serious trouble for good charities doing difficult, skilled work. Masters of the Universe are used to running the show themselves in their own companies, and they think they know best how to run any organisation. Sometimes they do, but sometimes the cash comes at a high price. Once they’ve got all the ‘toys’, the danger is that using their money to run poor folk, their schools, their estates or their children is just the most fun toy of all.
I suggested to this particular Master of the Universe (who happens to give to an excellent programme) that as well as giving by whim, wouldn’t paying more tax be a better way for the wealthy to pay their dues? He used the usual high-earner’s get-out: governments won’t spend his money as well as he can. If he gives it, he can direct it exactly where he wants. No doubt we’d all like to do that with our taxes, but the better way is to elect a government to spend it as rationally and accountably as it can. There is no evidence that charities spend money better: indeed researchers are too polite to conduct the sort of thorough, value-for-money scrutiny of charities that the state is subjected to.
The truth is, if the top good philanthropists got together and admitted that they now have more money than is decent, they could make a huge difference. Quite a small group of powerful clan chiefs of the City could change the tax-averse culture of the rich. They could shame the non-domiciled, the private-equity tax evaders, the trust fund inheritance tax cheats and their whole wicked tribe of tax advisers bent on denying the state as much money as possible.
They could advocate a top tax rate of 50% on earnings over £100,000. That would only affect the top 1.5% of taxpayers and it would bring in £4.5bn every year. Consider this week’s Joseph Rowntree Foundation report on the growing chasm between rich and poor. Earmarked for the neediest, that same £4.5bn would be enough to lift half our poor children over the poverty threshold. Now that really is serious money, even by the standard of Sir Tom Hunter’s exceptional £1bn over a lifetime, to be spent as he pleases (while ordinary taxpayers will be obliged to contribute another 28% to whatever causes take his fancy). It is good to give – but it’s even better to pay your taxes.