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Monday, 16 April 2012

Charity or Taxes?

It seems that rather than pay taxes to Her Majesty's Government lots of high income (over £10 million a year) people prefer to give to charity, thus rendering their income tax-exempt. Mr Osborne, the Chancellor, has decided this must be stopped. Their charitable giving should be capped and they should pay more taxes, allowing him - as Friend of the People - to decide what is a good cause and what is not.

Put like this, I find myself in sympathy with the Very Well Off.

Give money to the Government and chances are it will either waste it (as documented month-after-month by the Public Accounts Committee) or, worse, use it to bomb from a great height poor people in far away countries. Our former Prime Minister, Mr Blair, spent a lot of money doing both: he started the disastrous National Health Service IT projects and he bombed poor people in Iraq and Afghanistan.

It goes with the job for Mr Osborne to favour general purpose taxation. As I argued a few Blogs back ( Benefits or Insurance?, 30 March ), we should start withdrawing support for this idea. It only leads to waste and criminality.

Money should be raised by governments for specific purposes and when we pay up we should know, at least roughly, for what we are paying. In many cases, that can be simply done.

When I fill my petrol tank, I should know that the tax on my fuel is used to build and maintain roads, to police them and make them safe for all users. There is absolutely no reason why the fuel duty I pay should fund some shooting war picked by a megalomaniac or electorally challenged Prime Minister. If they want a war, they should have to impose a War Tax. That would immediately scupper tabloid enthusiasm for attacking other countries.

Probably, a lot of the money the really rich give to charity is spent on jolly good causes. If there is any political intervention needed, it is only to ensure via the Charity Commissioners, that the charities who benefit really do good.

POSTSCRIPT 20 April: I probably have to change my mind on this after reading a story in today's Private Eye (Issue 1312, page 8) concerning Andrew Lloyd-Webber, one of Britain's very wealthy:

" In 1992 he set up the Andrew Lloyd Webber Art Foundation, into which he funnels tens of millions of tax-exempt loot in order to buy paintings... he leases the pictures - bought with his tax-free philanthropy - back to himself, to hang in his home at a peppercorn rent". The paintings include a Picasso, a Canaletto and a Stanley Spencer.

The Foundation currently has unspent funds of £44 million. When it enters the art market, it does so with an effective 40% government-subsidy, representing the unpaid tax available for art purchases.

To make the case against my own argument even stronger, I should state the obvious fact that governments and Her Majesty's Revenue and Customs have always known that their tax policies are designed to give a helping hand to the very very rich, for whom every little helps.


  1. So if someone makes a donation to - say - a public school with charitable status, I as a tax payer am enforced to subsidise that bastion of wealth and priviledge. The Charity Commissioners can only weed out the patently bogus; they are in no position to arbitrate as to whether a charity really does good because that's very much a matter of opinion.

  2. It's a nice idea but I'm not sure how you would get it to work in practice.

    Would you for instance make taxes voluntary in which case we are back to everything being run by charities, or would you keep a general level of taxation but allow people to specify how their money was allocated, between education, transport, welfare, health services, policing, housing, defence, the arts etc.

    There would also be a difference in that the allocations would be motivated by self-interest, maybe not a bad thing, but different in principle from the idea of charitable giving.

    A young person starting out in work for instance might prioritise education and housing, an older person might prioritise health services and policing.

    You state it could be simple, I personally doubt this because even general taxation can be an administrative nightmare at the moment, and then you would get all sorts of political lobbying regarding priorities.

    There is either the socialist view that charities should be unnecessary in terms of financial input because people should trust everything to be fairly provided by the state, but this ignores the situation where charities often act positively as pressure groups to influence state policies.

    The other view is that the state should be rolled back and more of its functions should be undertaken by charities, so we're back to idea of Victorian philanthropy but if that had worked adequately there would have been no need for the state agencies, welfare, education, NHS, etc that we have now.

    I look forward to the blueprints in one of your future posts.