Editorial: CAF may be right in principle on Gift Aid, but it's time to be pragmatic

The Government has been known to urge the sector to try to speak with one voice.

No doubt there was a sigh of relief at the Treasury when six umbrella groups - including several of the sector's most significant membership bodies - pulled together and made a joint recommendation on the future of Gift Aid (Third Sector Online, 1 October).

But the convenient consensus did not last. Only four days after the groups proposed an accounts-based method of reclaiming Gift Aid, in which charities would claim a proportion of their voluntary income based on the share of donors who pay income tax, the Charities Aid Foundation forcefully rejected it (Third Sector Online, 5 October).

The difference of views highlights an important and interesting question (not least for CAF chief executive John Low - as chair of Acevo, which supported the accounts-based model, he now has a foot in each camp).

There is little doubt that the accounts-based model - which is also supported by the NCVO, the Charity Finance Directors' Group, the Institute of Fundraising, the Charity Tax Group and the Church of England - would direct extra money to the sector. Small charities that have lacked the resources or expertise to complete the paper trails necessary under the current system would find it easier to claim. The institute estimates that the system could bring an extra £400m a year to the sector. It's not surprising, then, that 80 per cent of respondents to CFDG's survey and two-thirds of those who took part in a Third Sector online poll favoured the system.

But CAF's submission to the Treasury's consultation on Gift Aid rejects the model on the basis that it would go against the original purpose of the scheme - to encourage members of the public to give to charity. By allowing charities to claim a lump sum at the end of the year rather than having to persuade individuals to sign a Gift Aid declaration, the scheme would cease to be an incentive for donors, CAF argues - it would simply become a pot of money that charities could dip into.

The logic of CAF's argument can't be faulted. But it raises a more difficult question: does the current Gift Aid system succeed in encouraging giving?

It has boosted charities' incomes. In February, Dawn Primarolo, who was Paymaster General at the time, said in written answers to Parliament that the value of donations made using Gift Aid had increased from £905m in 1999/2000 to £3.4bn in 2005/06, taking the tax relief paid to charities from £208m to £750m.

It is more difficult to tell whether Gift Aid has encouraged new donors to give. Research suggests giving has remained almost static for a number of years, and that the number of givers is actually falling, with those who do donate giving more. It is certainly difficult to imagine that someone who had little or no intention of donating would be persuaded to give £10 on the basis that the Government would give an extra £2.82.

On the face of it, Gift Aid seems to have been more successful as a tax rebate than as a means of boosting donor numbers. The accounts-based system would increase the gains for the sector and help reach the smaller charities that haven't yet benefited.

So although CAF's argument is ideologically correct, perhaps it is time for charities, and the Government, to be pragmatic.

Emma Maier is deputy editor of Third Sector

Finance Editorial

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