A gaggle of notables from the arts philanthropy world (and Tracey Emin) gathered at London’s Tate Gallery last night to mark the launch of a new campaign, Legacy10, to get Brits to give more. The campaign, set up by “the most influential PR man in the country” Roland Rudd, wants to get people to take advantage of a new tax break for legacy gifts to boost the amount that the dead leave to charity. Chancellor of the Exchequer George Osborne, who carved out a few precious pounds to pay for the new tax subsidy in his last budget, was part of the celebrations.
Legacy10 refers to a new rule, coming into force next year, which means that if you leave at least 10% of your wealth to charity in your will, the government will cut the rate of inheritance tax on the remainder from 40% to 36%. What this means is that a person leaving an estate of, for the sake of simplicity, £100 would, without making a gift, pay £40 to the taxman and leave £60 to their chosen beneficiaries; from next year, if that person leaves £10 to charity, this would cut the taxman’s share to £32.40 (36% of £90) and leave the beneficiaries only slightly worse off with £57.60. In other words it would only cost you £2.40 to give away £10. Sweet!
The purpose of the tax break (and the campaign) is to encourage more dead philanthropy, since only 7% of wills leave anything to charity at the moment (which at least is up from 4% in 1980). According to research commissioned by the campaign, 80% of Brits surveyed had not heard of the tax break and 70% would, on hearing about it, now consider a charitable bequest. Well, maybe. Such PR-driven surveys must always be taken with a pinch of salt. Moreover, only estates worth £325,000 or more are liable for inheritance tax and Mr Osborne has been keen to raise that threshold to £1 million when fiscal circumstances permit. So, rather than boosting mass giving, this tax break looks more of an incentive on the wealthy to give.
Legacy10 has launched a ‘10% pledge’ to encourage more bequests, with ten high-profile supporters signed up already, including Sir Richard Branson. Yet this draws rather unfavourable comparison with the Giving Pledge led by Bill Gates and Warren Buffett, which requires a commitment to give away at least 50% of the pledgers’ wealth. Ten percent does seem a bit of a thin commitment from billionaires like Mr Branson and the other multimillionaires on the list.
Legacy10 also sends out a worrying message that giving is what you do when you’re dead. One of the principles of philanthrocapitalism is that effective giving is about more than the money. Living donors engaged in the problems they are trying to solve are much more powerful than cold, dead cash alone.
In defence of Legacy10, some fundraisers think that legacy giving is the way to boost philanthropic support for endowments. Britain’s cultural institutions have tended to rely on public money in the past and few have built up much of a ‘war chest’ of endowed capital. With arts funding among the lowest priorities for taxpayers’ money in these times of austerity, the government is keen to wean galleries and museums off state subsidy and rely more heavily on private donors. To help them on their way, Culture Secretary Jeremy Hunt found £55 million earlier this year to match fund gifts for endowments. Even with such incentives, living donors can be chary about not seeing much immediate impact from their cash. Dead donors are not so picky, since it makes little difference to them whether their money is having an impact in 1, 10 or 100 years. As one museum director told us last night, legacies look like the best way to raise an endowment.
Mr Osborne admits that this tax break is just a small part of the process of building a culture of giving in Britain, which is what his boss, Prime Minister David Cameron hopes will be the legacy of his ‘Big Society’ project. Unfortunately for Mr Cameron, his flagship idea seems to be getting more traction overseas than it is at home. A recent poll of Conservatives says that a whopping 87% of them would like to drop the Big Society slogan and replace it with ‘Family, Education and Work’. Nothing there, we note, about giving.
We think that the debate about promoting giving in Britain is still too fixated on tax subsidy. Mr Osborne can be satisfied with the fact that he has come up with a tax break for giving that is a sop to the charity world but is not going to cost him that much at the moment. Hopefully the debate can now move on. A culture of philanthropy will be built by donors who can speak powerfully about how their giving is having a real impact and, in so doing, encourage others that philanthropy is an important and effective way to use their money. Changing the culture of British philanthropy towards a focus on impact and transparency is the real challenge for the Big Society.