The former chief executive of Barnardo's suggests it might be limited to those giving to charities that alleviate poverty or disadvantage
A good friend in the charity sector told me last week that I had been unwise to write in The Times that unlimited tax relief on donations to charities might not be altogether a good thing. But, interestingly, she didn’t tell me I was wrong.
And on Twitter most who commented did so positively. Sir Stephen Bubb was critical, but largely of something I have never said. "Contrary to Mr Narey’s suggestion that charities are doing well out of recession, the sector contracted at twice the rate of the public sector last year." Bubb trumpeted to The Times. In fact, I did not suggest all charities were doing well – just that some big ones were. Three of the UK’s biggest grew their voluntary income by a third or more last year and one, the excellent British Red Cross, increased donations by almost two thirds.
I wrote for The Times, not at the request of Number 10, as someone else suggested, but because I have three anxieties about providing unlimited tax relief to charities. First, I’m bothered about fraud. Bubb behaves as if he has never heard of such a possibility. And yet, as recently as November, the Charity Commission published a report of its enquiries into charities referred to it by the Big Lottery Fund. It’s impossible to glean from the report just how many organisations were referred. But 14 have been removed from the register and trustees from five of those have been convicted of criminal offences.
No one would argue – least of all the commission itself – that we can be confident about the propriety of the other 160,000 charities it supervises in England and Wales. In any case, charities operating anywhere in the world, including those not subject to any government regulation, can still be recognised as a charity for tax purposes. That should stop.
Second, I think there is an entirely proper distinction to be made between outstanding organisations such as Save the Children, the Samaritans or Marie Curie and charities such as Eton College, Oxford University or The Royal Opera House. That is not, I hasten to say, because I doubt the generosity of anyone donating large sums of cash to opera. Such individuals are undoubtedly philanthropic in every sense of the word. But from a donation of a million pounds, I don’t think that four hundred thousand should be paid by diverting tax revenues that are needed for struggling public services.
The University of Kent’s 2011 Million Pound Donor Report found that, putting donations to foundations to one side, more than half of individuals’ donations of a £1m or more in 2010 went to higher education, education, and arts and culture charities. They might continue to attract significant relief. But unlimited tax relief might be preserved for those charities that, for example, demonstrably promote the alleviation of human poverty or disadvantage. So HMRC might top up a donation of unlimited size to Oxfam, but not to the Donkey Sanctuary (which already banked £18m tax free from supporters’ wills in 2010).
Finally, there is something about effectiveness that troubles me. Despite all the public posturing, there is not a charity chief executive who is not concerned about the way one or more other charities use their voluntary income. Whether it’s about extravagant expenditure on advertising, continuing to prop up a final salary pension scheme, or simply squandering money on things that don’t work, every chief executive has his or her examples. We cannot take the effectiveness of all charities for granted. So, while I don’t doubt the effectiveness and value for money of WaterAid’s work in Africa, do I think we should guarantee unlimited tax relief to the 535 other "African" charities registered in England without evidence that they spend their donated income effectively? No, I don’t.
Martin Narey stepped down as chief executive of Barnardo’s in January 2011
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