Giving and the Big Society
Unlike many niche advisors Maurice Turnor Gardner LLP has unparalleled expertise in the charity and not-for-profit sector and we advise charities on constitutional, governance and other issues; families, corporates and banks on philanthropic initiatives, charitable giving/social responsibility and creating charitable foundations; and financial institutions on investment and banking products and services for the third sector.
We welcome the Government’s inclusive and open-minded approach to ideas and initiatives towards building “the Big Society”.
The Green Paper on “Giving” outlines the large number of initiatives which we support. It is self-evident that by creating greater opportunities to give, and making giving easier, the increased number of small donations will have an impact on the Big Society. However, what is abundantly clear to us, as advisers to high net worth individuals and philanthropists alike, is that the Government’s approach focuses too much on “micro giving” and that this is a large gap in the Green Paper.
We applaud and would encourage the opportunity to spread “the word” and incentives and opportunities to give (both in terms of time and financial giving) to all levels of society. We believe there is a duty on Government to entrench the social norm of giving that already exists and it is important to focus on the younger generation. We believe that it is particularly important to educate and encourage philanthropy in those of school age, to establish, early on, a “norm” or “habit” pattern of giving – again, either in time or financially.
However, rather than comment on the proposals outlined in the Green Paper, we think it is more important, to identify issues which were omitted, for whatever reason. The Green Paper is virtually silent on suggestions of ways to encourage a vital sector of the giving public, the “major” donors, other than obliquely by reference to the suggestion by New Philanthropy Capital and STEP that:
“private client advisers are well placed to refer wealthy individuals to places where they can access good quality advice on philanthropy. The advisers are credible, and able to make proposals at a relevant time, perhaps when considering a range of other investments, or tax reliefs available for giving. This is already the norm in the U.S.”
1. We believe that the most effective thing the Government can do is to simplify existing tax incentives (gift aid is over-complicated both for the charity and for the individual) and to introduce further tax incentives, to provide private client advisers with a way of introducing philanthropy to those high net worth individuals who do not already benefit from such advice. The simplification of gift aid for individuals, perhaps bringing it in line with the straightforward “deduction from income” as for companies, would make an enormous difference.
2. Although we appreciate that this is strictly a function of the Treasury rather than the Cabinet Office, we believe that this is absolutely key to unlocking large scale resources, the value of which may equate with money donated from all the micro economic incentives outlined in the Green Paper, put together.
3. We have two distinct, but related suggestions:
(a) The first, which will come as no surprise, is that existing tax reliefs on charitable donations should be simplified and extended. The UK resident and domiciled high net worth individual already pays tax at 50% which already goes to the Treasury.
The generosity of donors in the UK is frequently compared with that of donors in the US. However, there are two major factors which affect this pattern of giving. US donors are taxed at significantly lower rates and therefore have proportionately more “surplus” income to give. In addition, many charities to which American donors contribute provide services which are not provided by the US Federal or State Governments whereas the equivalent services are provided by the UK Government and which are already paid for by the UK donors through their tax contributions. There is no additional incentive to contribute further to resources which a donor already feels he is funding through his own tax contributions.
If tax incentives were broadened, for example, through split interest trusts or charitable remainder trusts and the gift aid process simplified and extended to other assets (works of art or life insurance products for example) the net result of which would not necessarily be a loss for the Treasury, in that that more money would be directed to charities which are increasingly being asked to provide services previously provided by the Government. Therefore even though the Government may lose tax revenue through tax reliefs, it will save money by not having to spend the revenue collected through taxes on various causes supported by charitable giving. So increasing tax incentives would do more to contribute to the Big Society.
(b) The second area with which we think Government could help directly, is helping to change the attitude of the media towards the generosity of big donors. Donors do not give money to charity to benefit from the tax incentives. No-one gives away £100 to get £20 back. No-one gives to save tax. However, tax incentives can motivate the desire to give larger sums once individuals have decided to give. And donors can then be encouraged to donate the higher rate relief to the charity as well.
Tax incentives should not be considered as a “reward”. It is more a decision of the donor to give away more of what he has earned to the charity for the benefit of its objects, instead of paying it to the Treasury in tax.
It is clear that whilst journalists relish stories about a child who gives his or her pocket money to a disaster fund, their attitude is very different to major donations. Implicit in much of their reporting is the suggestion that in making large donations the individual is involved in some tax avoidance scam. We believe that this may in part stem from ignorance of how the tax reliefs work (which is another reason for their simplification) but what many journalists seem to miss is that the donor does not get anything back from his donation, it simply reduces his overall tax bill and it is the charity that benefits.
It is clear from the success of the recent campaign run by the The Evening Standard and the Dispossessed campaign that the media is influential in this area.
If MPs (for all parties) were encouraged to speak publicly about mechanics of giving and take the stigma out of it for major donors, we believe that this would encourage big donors to give increasingly larger sums. It is clear from the US example that peer pressure and public support has been shown to be very effective.
4. We also think that corporates should be encouraged in the following ways:
(a) Payroll giving should be made easier to implement. The Government can have a direct impact on this.
(b) “Matching” can be very successful both in terms of the Government matching a charitable donation by a firm and internally within the firm where the firm matches the employee’s donation.
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