What is wrong with Charities and tax relief for donors?

I am a member of several charities and play an active part in running one particular small one. So I am very much in favour of charities in principle. However, the recent attention on charities and tax benefits has brought into focus in my mind several issues which I am unhappy about. I would love to know if these are issues that concern others.

First, I cannot ignore the tax benefits issue. I think it is totally wrong that some very highly paid individuals use charity donations as a means to avoid paying income tax. However, if the charities concerned are acting improperly and really just shuffling the money back to the donors or the donors’ families, then this should be tackled directly by stripping the charity of its charitable status. And possibly prosecuting those involved, if this is possible. The imposition of a cap on donation levels does not seem to be the correct way to address this problem.

I use gift aid and am happy that the charities I select get the benefit of extra money from the Government. (This really means the rest of you tax payers are giving money to charities that I choose). But, as I understand it, at present there is no limit on the amount of gift aid that can be given by one person. (I also understand that Gift Aid is not being capped under the present proposals, but it will serve for the basis of my argument.) So, am I happy if a benefactor chooses to gift aid £100 million to a cat home? I will have to help foot the Government’s contribution through my tax. But also, because this benefactor is probably a higher rate tax payer, I will have to contribute – along with the rest of the UK taxpayers – for the extra tax relief this donor gets, to make up for the Treasury shortfall. Well as you might have guessed I am not at all happy! So I think there is a problem here.

I think there are really two issues.  One: is it sensible to have  limitless allowances for charitable giving? I think almost everybody would say no. The problem then is a much more thorny issue. What should the limit be? Two: should all charities qualify? As you will see, if you read on, I have problems with some charities. But despite this, probably the answer should be ‘yes’, all charities should qualify. But in my opinion there should also be some tightening up on charities’ operations. To take an extreme, and probably unlikely but possible case, if all the wealthy people in the UK decided to give a lot of money to a single charity, the rest of us would be effectively supporting it as well, with no choice about it: taxation without representation. People have gone to the stockades over that. Personally, removing tax relief on charitable donations altogether seems completely reasonable. But politically I recognise it would be a non-starter.

Now about the charities themselves… Why do they insist on sending frequent begging-type letters, and why can’t I opt out of these, and/or receiving their glossy magazines? This would  save them money which they could devote to their charitable purpose. I guess I get at least one begging letter every week. I never answer them out of principle, thinking that if I don’t respond they might learn and stop it. But they don’t. So I shred the letters and compost them. I use the return envelope with a sticky address label for letters I want to send. (Unfortunately, with increasing use of email, I am collecting these envelopes much faster than I am using them, so the pile just grows.)

All this leads me to feel that, in general, charities, particularly big ones, are not sufficiently focussed on their efficiency. To check this out I took a look at some financial returns published on the Charities Commission website (http://www.charity-commission.gov.uk/ ). The two figures I looked at were annual income in the last reported year and the “Income generation and governance” costs. I picked charities pretty much at random and the table below gives the values I found and their ratio.

Name of charity	Income (£m)	Costs (£m)	Ratio
Help for Heroes	45.72	2.82	6%
The Save The Children Fund	291.47	28.08	10%
National Trust	412.87	59.71	14%
RNLI	163.57	33.31	20%
RSPB	122.52	29.01	24%
Oxfam	367.5	88.4	24%
Woodland trust	27	6.84	25%
WWF UK	57.76	15.42	27%
Macmillan cancer support	133.6	36.92	28%

To put this information another way, these charities spent between £60,000 and £280,000 for every £1m pounds they raised. While browsing this website, I found one charity that spent £330k to raise £620k but only spent £94k on “charitable activities” that year. Is this really a charity? I would be happiest if charities spent no more than 10% of their income on “fund raising and governance”. That might stop some of these begging letters.

Another thing that just seems wrong to me is sponsoring people to do things that they really want to do.

People should pay for these things themselves not ask others to help them, in the guise of raising money for charity. I took this quote from a company offering skydiving “You can jump for “free” providing you raise at least £120 over the cost of the skydive.” A radio comedian  put it into context nicely by saying that he really wanted to have a threesome with two attractive Brazilian ladies, and was anyone willing to sponsor him? Another aspect of many of these schemes is that the tasks have an element of danger about them. By sponsoring someone you are really encouraging them to do something dangerous. Is this really a friendly act?

This type of sponsorship seems to me a specific example of commission being paid for fundraising. This seems to be just wrong, but not really much worse, I suppose, than paying a fixed rate for fundraising. I do not feel comfortable with this either but it does appear to be quite commonplace. Which brings me to my final area of disquiet, that of charities outsourcing work to companies that are in business to make a profit. I cannot quite rationalise my strongly felt discomfort about this. I accept, and advocate, the use of the profit motive as a powerful means to drive efficiency and I would want charities to be efficient. But I feel charities should be fundamentally different from commercial companies and somehow the increased use of outsourcing is blurring the distinction. I do not feel it proper that people employed by charities are “ducking and diving” as though they were in business.