A question for the Coalition: Would Lib Dems and Tories support the Charity Tax if Labour had proposed it?

by Stephen Tall on April 13, 2012

One of the aspects of the furore over the Coalition’s Charity Tax that has struck me is that charity is a more divisive issue than I’d realised.

Those of us who work in the charity sector probably take for granted that our organisations provide a public good, that the aggregated generosity of donors and the endeavours of staff make for a better society. That’s probably a majority view among the wider public, but it clearly isn’t a universal attitude.

Look at the reader comments on major news websites — for example, the BBC here or the Telegraph here — and you will find plenty of people who have serious issues with charities. Criticisms range from them being rich people’s hobbies to their alleged wastefulness to the suggestion that charitable tax-relief prioritises donkey sanctuaries over the NHS.

So here’s my quick three-point defence of the principle of charities, the work they do, and why society (and therefore the Government) should want to encourage them to thrive:

1) Charities serve the public benefit.

Will the public always cheer on every charity equally? No, of course not — for some, the idea that public schools or animal sanctuaries are charitable enterprises is anathema. But then I don’t cheer on all aspects of public spending equally either, preferring public spending on education (say) to the renewal of Trident.

The fact remains: the public overwhelmingly benefits from charitable activities, and indeed it is their very diversity which is the reason for their success. Because there is a charity which suits everyone’s tastes, and serves all our individual senses of how society can be bettered, more money and volunteers are collectively levered into the charitable sector than could ever be achieved by state provision alone, or by charities defined solely by what we personally might consider to be worthy causes.

2. Charities are our ‘small platoons’

One of the more disturbing critiques I’ve seen in recent days is that charities are somehow undemocratic, that any tax-relief offered to donors is money which should instead have been handed to the state to spend. This claim has come from some surprising quarters — for example, arch-Tory Andrew Neil tweeted:

Let’s get some proportion here. In 2012, central and local government will spend some £712 billion, the charitable sector some £11 billion: state spending dominates. I’ve always been attracted as a centrist liberal to the Burkean ideal of ‘small platoons’ able to take on (and adapt, innovate and improve) the functions of government. We need a mixed market, a plurality of providers, and the charitable sector is well-placed to fulfil that role.

3. Charity-giving should be encouraged for all donors.

There has been some cognitive dissonance at play in the last couple of weeks. On the one hand politicians ask the wealthy to dig deeper into their pockets. And then on the other hand they bemoans the wealthy who do so for allegedly skewing priorities and so-called tax-dodging.

A tangential argument has been that the wealthy are somehow getting preferential treatment in their charitable giving, that tax-relief on donations favours the rich. This isn’t the case. Until the Coalition decreed otherwise in the budget, the guiding principle (as Nick Aldridge puts it on his blog) underpinning charitable tax-relief has always been that:

people shouldn’t be taxed on income they’ve forgone by giving it away for the public benefit.

Thus basic-rate taxpayers and higher-rate taxpayers have been treated equally: neither group of citizens has been taxed on the money they choose to give away to good causes. Rather remarkably, it is now a Liberal Democrat and Conservative coalition government which has chosen to end that sound principle.

To add insult to injury the Coalition has done so under the pretext of clamping down on tax-dodging, despite the fact that the Treasury has yet to be able to produce a single credible example of how the wealthy can legally get rich by giving their money away. For once Ed Miliband has it right:

Only this government could be so out of touch as to cut taxes for the richest people in our society but at the same time single out those who are trying to do the right thing for a tax rise.

And deep down, Lib Dems and Tories alike must know that, if they had been in opposition and this proposal had been put forward by Labour ministers, they would right now be taking to the airwaves to lambast a decision that will leave the wealthiest just as wealthy and charities and those they serve that much poorer.

To show your support for the ‘Give it back George’ campaign for the Government to drop the charity tax, please visit this site and sign the petition.

Full disclosure: I’m a full-time fundraiser who’s been working for educational charities since 1998.

* Stephen Tall is Co-Editor of Liberal Democrat Voice, and also writes at his own site, The Collected Stephen Tall.