Cathy Pharoah: Charitable tax reliefs would encourage major donors

The wealthy need an incentive to donate and we should respond to their concerns, says our columnist

Cathy Pharoah
Cathy Pharoah

It seems that at long last the UK's major donors are finding their voice in the great philanthropy debate. So what are they are asking for? Are we fully prepared for this part of the big society?

Greater scope to influence how their donations are spent is one issue. At the recent launch of the Department for Culture, Media and Sport's strategy for philanthropy, for example, Lord Sainsbury appealed for more acceptance of private donors as trustees of charities they donate to.

Indeed, it does seem anomalous that donors who set up independent foundations have considerably more influence over how their donations are spent than those who give directly to already existing institutions.

However, even foundation donors are picking up the cudgels as they find their discretionary power and independence threatened by the suggestion of mandatory payout rates by foundations - an idea that the recent Giving Green Paper has floated for consultation.

A new forum of philanthropic leaders and donors - the Philanthropy Review - has been set up to lead an across-the-board examination of fiscal and non-fiscal incentives for major giving.

The extension of charitable tax reliefs for the wealthy is very much on major donors' agendas. Lord Myners would like to encourage the 'giving while living' of valuable assets, such as works of art, through the provision of some standard capital gains-type tax relief. This would have the huge added value of saving important treasures for the nation.

Meanwhile, in a House of Lords debate on increasing philanthropy, numerous other peers expressed support for new tax reliefs for lifetime legacies - arrangements based on the US model, in which donations are invested to produce an income split between charities and living donors. These have proved popular among the wealthiest US donors, often resulting ultimately in a bequest for the charity beneficiary of the lifetime legacy.

This is an agenda indicating a willingness to donate more, albeit with some bargaining counters, and it has emerged despite fears that increased generosity might be used mainly to plug government spending gaps. But there still does not appear to be an equivalent willingness to trust major donors. Acevo has called for a regulatory approach to raising more money from the wealthy, with a statutory tax on bankers' bonuses to fund the Big Society Bank.

Charity managers continue to believe that donor influence on boards should be kept very firmly in its place, while the regulators are mainly concerned with the containment of potential abuses of power and the risks of tax avoidance.

But we can't have our cake and eat it. If we are to attract more major donors into the big society, we need to ensure that our response to the Giving Green Paper positively fosters their interests and needs too, and opens new doors.

Cathy Pharoah is professor of charity funding at Cass Business School

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