Margaret Thatcher’s greatest disappointment as Prime Minister was failing to create a more philanthropic society. Shortly after leaving office she told Frank Field, the Labour MP: “I cut taxes because I thought we would get a giving society — and we haven’t.”
In fact the UK, while lagging behind the United States, is the fourth most philanthropic country in the world and much the most philanthropic in Europe. This is the finding of the Charities Aid Foundation in its authoritative study, Gross Domestic Philanthropy, published earlier this year. It compares the percentage of GDP donated by individuals to not-for-profit organisations in 24 major economies. In the US this accounts for just under 1.5 per cent of GDP. New Zealand and Canada come next with figures of almost 0.8 per cent. For the UK the figure is 0.54 per cent, way above its European neighbours; Germany and France come in at 0.17 and 0.11 per cent respectively. Spain and the Czech Republic are the European laggards, with rates of philanthropy less than half those of even France. As a percentage of GDP, Americans are 29 times more generous than Spaniards.
Although higher levels of employer social security charges do seem to reduce giving, the study also shows that there is little correlation between tax rates and and the level of philanthropy. Switzerland, for example, has very low rates of federal taxation yet gives only 0.09 per cent of GDP.
The widespread notion that the US tax system is the major explanation for Americans’ generosity is very largely a myth. In any case, the UK tax system’s treatment of charitable giving is as generous as that of the US. For an additional-rate taxpayer, i.e. someone earning more than £150,000 per year, the cost of donating £10,000 to their chosen charity is £5,500. The donor makes a gift of £8,000 to the charity, which then reclaims £2,000 from HMRC via Gift Aid. By then declaring the donation on their tax return, the donor’s tax liability is reduced by £2,500. The often-voiced cynical assumption that the rich give money to charity to avoid tax is nonsense. After all, with any charitable gift the donor is still worse off after making the gift than they would have been if they had not made it and just paid the tax. Nevertheless, while there is always room for simplification, the UK tax system is very favourable to charitable giving.
Mrs Thatcher was too tough on herself — Britain does better than nearly everybody. The US is in a league of its own, but getting to that level of giving elsewhere will need more than cuts to tax rates or more generous treatment of charitable giving.
More specifically, Americans are much more generous in terms of broadly conservative or pro-market philanthropy. The UK has no equivalent to Charles and David Koch or the late Richard Mellon Scaife, who have dedicated billions of dollars to non-profits who share their limited-state, pro-market worldview. There are signs, however, that such giving is on the increase in the UK.
Nigel Vinson, a Tory life peer, has made a gift this year of £5.5 million to the University of Buckingham — the first and still one of the few institutions of higher education outside the state sector — to set up a new Vinson Centre for the Study of Liberal Economics. Its remit will be to undertake research, from a broadly Hayekian perspective, to widen the understanding of the freedoms that underpin our society. Vinson has been closely associated with pro-market think tanks for more than 40 years. He floated the business he had set up at 21, Plastic Coatings, when he was 37 and sold out when he was 39, devoting his time and money to broader interests, most notably the think tanks. Now 85, Vinson believes that his gift is the best way to ensure that these endeavours continue to be promoted after his death.
One of the big fears of donors is that their intentions will in due course be subverted and their money will be used for purposes they would not have approved of. Vinson is a great supporter of Anthony Seldon, the current Vice-Chancellor of Buckingham and son of the late Arthur Seldon, co-founder of Britain’s first pro-market think tank, the Institute of Economic Affairs. It is impossible to know whether Seldon’s successors will share a similar outlook, so Vinson has set up an ingenious triple-lock structure to avoid his money being spent on projects of which he would not approve. His funds will be paid into a special account, and expenditure from it must be authorised by the Vice-Chancellor of Buckingham, the Director General of the IEA, and the chair of Vinson’s own charitable trust.
Vinson’s view is that the point of wealth is to set standards and by making his donation he will encourage others into doing more. In narrow terms, he hopes the new Centre, with his active involvement, will raise an additional £25 million from other benefactors. More widely, he is promoting the notion that public policy and the world of ideas is a very worthwhile arena for philanthropic giving.
It is not just think tanks which rely on support from benefactors. It is a sad fact that magazines such as Standpoint are not commercially viable on their own — they need philanthropic backing. While many US magazines have long had a not-for-profit structure, UK titles such as Prospect, Granta, the London Review of Books and the Literary Review have been run theoretically for profit but never knowingly made one. The latter three titles have relied on the family wealth of their respective editors to keep going; Prospect has recently admitted the futility of hoping to make a profit and is being taken over by the Resolution Trust, endowed to the tune of £50 million by the magazine’s long-term backer, Clive Cowdery. Standpoint has been supported financially since its inception by donations to a charity, the Social Affairs Unit. Unlike Prospect’s new philanthropic owner, sadly, the SAU does not have an endowment and needs to fund-raise actively to keep Standpoint on the road.