For the last couple of weeks countless articles, opinion pieces, blog posts and tweets have appeared on a daily rate raging about the recent plans to cap the tax relief on major gifts to charity.
The announcement prompted a very quick and strong reaction from the charity sector and major philanthropists themselves, led by a campaign with the eponymous hash tag #giveitbackgeorge (though I’m not sure if it alludes to the tax relief or the money it will indirectly deprive the sector of). Another hash tag that has emerged is #capgate, alluding to the scandalous nature of the proposal and the bewildering level of fragmentation that seems to exist within the current government.
On the one hand, Jeremy Hunt and other governmental ministers are actively promoting an increase in philanthropy and charities’ reliance on private giving, and on the other hand the Treasury is announcing measures which are sure to have a stinting effect on it. Where is the consistency in current government policy? As Sir Nicholas Hytner recently put it, “[this] makes no sense according to their own policies.” But not only does this contradict all the talk and effort around increasing philanthropy, seemingly a big priority for the Government and a large component of the “Big Society”, it is in fact counterproductive.
Hours after the plan was announced, Twitter was filled with accounts reporting real-time conversations with philanthropists who were either planning to withdraw some of their support or decided against going ahead with pledged donations. With 9 out of 10 philanthropists saying that they are planning to reduce their giving if this plan goes ahead, the threat to the future growth of philanthropy is very real. And arts and cultural organisations (particularly large ones) are disproportionately reliant on major donors – according to the latest Coutts Million Pound Donor report, they received the third highest amount of million pound donations as a single charitable sector. Recent estimates suggest that the resulting deficit of the proposed plan could add up to £80m worth of philanthropic money for the cultural sector alone – more than a 20% decrease.
The other real threat is that of deterring new philanthropy – not only will this not incentivise more people to start giving generously, it is likely to discourage them.
Which neatly brings us to the issue of motivations: the Government seems to want to penalise philanthropists that don’t give for purely altruistic reasons – it almost seems like a test to see who is truly committed and will continue giving or giving us much, despite the disincentives for doing so. However, the drivers for giving are not always straight-forward or one-dimensional, nor do they have to be. The forthcoming NPC/ Ipsos MORI study of reasons for giving will provide some interesting insights into philanthropic drivers. However, in the argument of tax reliefs these are almost irrelevant. It is no secret that the tax efficiency of philanthropy can be particularly appealing for some major donors. But the motivations behind a gift should not undermine its value. If the issue is, as the Government claims, that some philanthropists are abusing the system and enjoy tax reliefs on donations to “overseas charities”, then the crack-down should be on addressing this rather than throwing the baby out with the bathwater – by inhibiting the majority of philanthropists who give a lot to legitimate charities and with great impact, they’ll be hampering (would-be) recipient charities, and of course the beneficiaries of the charities themselves.
And going back to the initial issue of disjointed policies, this all comes at a time when arts organisations (and other charities) have had their public funding slashed and are consequently investing in fundraising (as they were told) so as to fill some of these income gaps wherever possible. But as they try to build relationships and start these conversations with philanthropists, against this hostile backdrop it seems likely for the returns on investment to be lower than anticipated. And to further add insult to injury, the Arts Council is delaying the launch of its Catalyst funding (£7m) for the smaller and more inexperienced organisations. This must be frustrating for those smaller organisations that have budgeted for increased individual giving and were counting on the support of the Arts Council to achieve this, though in fairness they’re the ones least likely to be directly and massively affected by the cap restrictions, as they are most likely to try to raise more modest amounts of money.
The only silver lining is seeing the charity sector coming together with a strong and coherent voice, which is in stark contrast to that of the Government. A government spokesperson has now said that they will work with charities and philanthropists “to ensure the removal of the tax relief does not have a significant impact on charities which depend on large donations.” But it’ll take more damage control towards philanthropists themselves, who have been alienated by being branded tax dodgers as a collective. The Government’s attempt to emulate Robin Hood will fail – he took the money from the rich and gave it to those in need, whereas the current plans will ‘hijack’ rich people’s money that would’ve otherwise gone directly towards the greater good to begin with!
• John Studzinski: Hitting charitable giving is a poor way to get tough on the rich, The Independent
• Charity tax row: We will stick with policy, says Danny Alexander, BBC
• Charity tax relief plans attacked by philanthropists, The Guardian
• Nick Clegg to go on charm offensive amid fury over charity tax cap, The Guardian
• Charity tax relief cap under fire as philanthropists warn of funding crisis, The Telegraph
• Vince Cable and David Davis break ranks to join outcry over charity tax cap, The Guardian
• ‘Almost Frightening’: Philanthropists React to Government Tax Dodge Claims, Spear’s
• Who are you calling tax dodgers? Philanthropists enraged by slur, The Independent
• Giving with one hand, Museums Association
• Arts & Business response to Budget, March 2012