Friday, 29 October 2010

What Cuts mean; why we need more Giving.

So we are now seeing what the cuts actually mean for our sector and our beneficiaries in local councils. Norfolk County Council has announced its plans. They include ending their HIV-AIDS service, reducing mental health services, slashing support for learning difficulties, reducing social care equipment, and removing subsidies on meals on wheels and school transport.

They are also to make people who get social care services to "pay a more realistic charge".

This shocking example is being followed elsewhere in other Councils.

In this context I loved the Editorial in The Times yesterday on "The Giving Age". As it says,

"the fact remains that charitable giving does not permeate Britain's wealthy as it should" should be at the centre of David Cameron's Big Society. As Sir Francis Bacon said, money is like muck in that it is more useful when it is spread around".

You can read the full Editorial here;

Wealthy individuals in Britain could do a lot more with their fortunes

It was Aeschylus who coined the word "philanthropy" by combining the words for love and humanity. Some of Britain's wealthiest people could perhaps use a nudge in the direction of both.

Though the economic fortunes of the nation have not risen in a straight line, the postwar period has brought a huge growth in individual prosperity. There are now 53 British billionaires. There are still 284,000 millionaires, even after a recession, between them worth £1.28 trillion.

Yet examples such as Lloyd Dorfman's gift to the National Theatre are still rare in Britain. We report today that British universities are turning to their alumni to plug the gaps in their funding, a source of income that is taken for granted in the United States. Giving in the UK is little more than 1 per cent of GDP, half of that in America. American households with annual incomes above $200,000 give 7.4 per cent of their income to charity. UK households with a similar income give 1.2 per cent.

Those wealthy Britons who give do so generously. One could provide a lengthy and honourable roll call of British philanthropists, from the high-profile (the Sainsburys, John Duffield, Sir Tom Hunter) to the less so (Christopher Cooper-Hohn, Margie and Jamie Moffat) to the outright famous (Sir Elton John, J. K. Rowling).

They and many others deserve credit. But the fact remains that charitable giving does not permeate Britain's wealthy as it should. Even at the highest level, stories such as Leonard Blavatnik's gift of £75million to the University of Oxford are rare in this country. We have nothing to match the long tradition of American philanthropy. Andrew Carnegie, for example, gave $350 million ($7 billion in today's money) in 1901 to a range of good causes, including building Carnegie Hall.

Today, Bill Gates is slowly deploying his massive fortune to try to eradicate malaria and river blindness and Warren Buffett has helped through the largest individual charitable gift in American history - a donation of $31 billion. Why the difference? In part, Britain's rich are often second-generation, and those who have inherited can feel honour-bound to their offspring. A munificent State, also, can lessen the voice of individual conscience.

Then there is tax. The British Government sponsors Gift Aid, by which charities are able to claim an additional 25p from every £1 donated by UK taxpayers. Those in the 40p tax bracket enjoy the same break for philanthropy. Top-rate taxpayers can claim 37.5p on every £1. Gifts of shares attract tax relief and exemption from capital gains tax. Charitable gifts are free of inheritance tax.

The one serious fiscal difference, however, is that the use of financial intermediaries in the US is much more sophisticated. In the US, a tax break can be taken immediately on donations involving more complex financial arrangements.

Mr Gates and Mr Buffett recently issued a Giving Pledge in which they challenged America's wealthiest to give away half their fortunes. Even a tenth would significantly alter the state of charitable giving in Britain. There are some signs of progress, notably in "giving circles" such as the Funding Network, ARK and the Private Equity Foundation. But so much more could be done. Charity must be at the centre of David Cameron's Big Society. As Sir Francis Bacon said, money is like muck in that it is more useful when it is spread around

Amanda McLean the new CEO of the Institute of Fundraising and I wrote a letter in response which the Times published today.

Read it here

Amanda and I met with Justine Greening MP, the Treasury Minister responsible for Gift Aid recently. We urged her to look at extending Gift Aid while the revenue start reforms to the bureaucracy around the scheme. We also spoke of the need to protect charities from the VAT increases in January. It is not simply a matter of the rise itself; this acts as an impediment to charities taking over the running of services from local Councils because they don't pay VAT. This is particularly dotty when third sector organisations share services they still face two VAT bills.

I was impressed with Justine. Clearly a rising star, on top of the brief and genuinely interested in how Government can help us expand and deliver more for citizens and communities. We also talked about the need for more social finance and how HMT could give this a bigger push. So we shall see.

What we all know is that as the cuts hit, we face two further blows; VAT increases in January and loss of relief on Gift Aid in April. This is damaging to our role in meeting the rising demand from our beneficiaries at a time of spending cuts.

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