Perplexed about philanthropy

The chancellor’s U-turn on limiting tax relief for charitable giving highlights Britain’s uncertain relationship with philanthropy. We understand the need for charitable donations but are uncomfortable when it comes to giving tax breaks to the well off.

Now that the dust has well and truly settled following George Osborne’s 100% retreat on his so-called philanthropy tax, it is useful to reflect on what it told us. Not so much about how strange government decision making seems to be at present – with policies brought in without thought only to be withdrawn a little later. Nor indeed how dysfunctional the Treasury is and how poor decision making is on tax in the UK.

No, what interests me more is what it seems to show we Brits think about the concept of philanthropy. Because we seem confused and perplexed.

Philanthropy is a strong word that has connotations of Victorian Britain, of the rich dispersing their largesse to look after the less fortunate, or to build municipal civic libraries or museums. For many years we admired such people but were grateful that we no longer had to depend solely upon whether they decided to do good or not, nor what strings they might attach to it (be that religious strings or stipulations on what schools taught).

So rich people, giving away money is sort of good, and we love the fact that Bill Gates does it so much; but it is a little peculiar.

That is a problem given that as the state pulls back we are going to have to depend much more on the voluntary and charity sector, whether we call it the Big Society or not. One aspect of this will be much more reliance on volunteers keeping services going – allowing some public services to be run on a shoestring as either charities that rely on volunteering undercut other contract bidders who do not, or where the community itself either has to run its library or community centre for free or just does not have one.

As the state withdraws, the relative importance too of the rich – cutely and coyly known as high net worth individuals in the philanthropy and charity fundraising world – does rise. We need their money if we are to fund the arts and historic buildings that government has less money for but even more in areas like adult mental health, new approaches to isolation of older people, looking after and trying to solve the problems of homelessness and drug addiction – all areas where cuts are biting hard.

So how do we persuade these well off people to put the money into charity rather than to spend it on yet another home or a new yacht? Well, one of the answers ends up being about tax. And just as we all search for the most tax efficient place to put our (usually meagre) savings in we know the well off will be doing the same (with the help of expensive advisers) – so it is intuitively right that we need some tax breaks to get them to give to charity not to mammon.

And then we get uncomfortable. We are giving tax breaks to very rich people to encourage them to give because the state has cut back its spending and there are more needy people as a consequence of a recession caused – to at least some extent – by very rich bankers. All a little strange.

And where politicians are answerable to us for the way they spend our money, the tax-break spenders can give as they want. So if supporting an elite sports charity and one that does up old Georgian buildings or supporting Oxbridge to get ever nicer facilities takes their fancy more than looking after the poor in a forgotten northern town, then so be it.

There is no right or wrong answer to any of this. It reflects the British ambiguity to the role of the state and in our attitudes to wealth. It is also a manifestation of the tensions we feel as a nation between the desirability of local, do-it yourself, voluntaristic action to attack problems and the horror of the unfairness of a postcode lottery in what services are available and a belief that the state must not just stand by when people are in trouble.

But while the mixed feelings will not go away, the need for philanthropic money is only going to increase. So we will get a lot more soul searching as the decade goes on.

This blog was originally published earlier this month on Public Finance.