Either Way, It's the Poorest Who Pay
by The Rt Revd Dr Peter Selby
Posted: 16 Apr 2012
At last, it seems that the budget has brought to the surface a number of issues about the encouragement of charitable giving. These are not new issues, but suddenly the proposal to cap individual gifts has made the issues unavoidable, and even caused them to be named by politicians who might otherwise be expected to have supported charitable giving as the way to give both help to the poor and to support the arts and other major heritage projects.
Even if we are tempted to smile somewhat cynically at the Chancellor's declared 'shock' at discovering that people were using the tax reliefs available on charitable giving so as to reduce their liability to tax almost to nothing, we can be glad that he has seen fit to question the political orthodoxy that originated in his party but which other parties have not seen fit to question: that orthodoxy is that it is morally better for the poor to be helped and the arts to be supported by charitable giving than by government expenditure supported by the tax system. The orthodox view was that what made charitable giving morally laudable, and taxation morally suspect, was that charitable giving was voluntary, whereas taxes were compulsory. There is no doubt that this orthodoxy that declares the voluntary to be morally superior to the compulsory has been one of the many forces driving most developed economies, including ours, in the direction of lower taxation. The small state is the attractive by-product of the Big Society.
But there is no question that one person's volition is another's compulsion, and giving to charity does not come free to those who are not in the position to make that choice. If public expenditure has to be reduced (as we are constantly told) to solve the problem of the deficit, and if (as we are also told) the welfare state is part of what has to be made smaller, the poor are effectively taxed by a reduction of their benefits, and as we know the effective rate of that taxation can be very high indeed. It may not be the case that the tax relief on charitable giving can be equated in money terms with welfare deductions from the poorest, but the principle remains true: tax benefits for some must mean reduced welfare benefits to others if public expenditure is to be reduced overall.
The moral issue is even cloudier when it comes to support for the arts and heritage projects. It is not just the National Trust and English Heritage which, in benefiting from the tax relief given to their donors, also reward their donors by privileges such as free access. From time immemorial donors have also been offered reputational benefits for their giving: charitable giving may be voluntary for those who engage in it, but it is certainly incentivised in all sorts of ways even before tax relief is taken into account. Those rewards are not of course available to those who don't have enough money to give large sums to charity; but what is the moral basis for effectively making those too poor to make such donations pay through higher taxes and reduced benefits for the charitable activities of those well enough off to afford them?
There are other moral issues which the debate about tax reliefs for charitable donations brings to the surface. The voluntary principle, the notion that acts of individual volition are somehow morally superior to those that are required of us as citizens and 'taxpayers' makes the assumption that morality belongs to the individual rather than to the society as a whole. The projects supported by a person who can afford it are thereby prioritised over those projects which can only be afforded by the common will; which arts, heritage or charitable projects are supported and which are not is decided, under the voluntary principle, by the market: what happens is decided by those who pay. The taxation system, on the other hand, is decided in a democracy by a system of voting that at least in theory gives to everyone's preferences equal weight.
What our economy seems to have managed to do is to create a society in which the poorest end up, as a result of the reduction of their benefits, having to pay for arts and heritage projects - the Olympics are the most striking example - by buying lottery tickets as the only way they can see out of poverty; while those of us with more money can avoid the irrationality of the lottery and receive rewards from the generality of taxation for the projects we support.Either way, it's the poor who end up paying. And there's nothing very voluntary or (arguably) very moral about that. Whichever way the tax relief debate goes, we have a responsibility to draw attention to the more fundamental values issues that are at stake.