Paul Palmer is Professor of Voluntary Sector Management at Cass Business School, City University London. He is author of A Step Change in UK Philanthropy, which is published by the Centre for Policy Studies and is available to download here.
In the late 1940s prominent City Businessman Sir Robert Whaley Cohen was asked for a donation by Toynbee Hall, the University settlement in the East End of London. He replied expressing that giving to charity was a most noble act but that the Labour Government’s high taxation rates prevented him.
For what was a relatively short period – from the 1940s until 1979 – the UK had high rates of taxation for both modest and high earners, ostensibly to pay for a welfare state. There was a belief by Labour politicians that, despite the belief of Lord Beveridge, the architect of the welfare state, that there should be a role for philanthropy, charity would wither on the vine of the welfare state.
That Labour belief was disproved (as were so many others) by Mrs Thatcher’s election in 1979. One of her ambitions was that, as in the US, if individuals were given freedom and choice to create wealth, so they would, if unburdened of high taxation, be generous supporters of charity. As she recognised in a speech to the Centre for Policy Studies in 1988:
“There is a great generosity in the British character, and that is why we have always had tremendous voluntary organisations. Equally, if you look at the rise of public spiritedness in this country as we got the great increase in industrial power in the last century, alongside that came a great burgeoning in public spiritedness. All of this is fundamental in the British character, but somehow it had all been pushed down and overlaid by years of Socialism which had not let it show itself to the greatest advantage.”
Today the British people are now the second most generous givers to charity in the world.
But today charities face many problems. Since the late 1970s, the income of charities has quadrupled – largely because of the growth in the amount of money channelled into charities by central government. That has caused problems with accountability and “capture”. But, given the state of the public finances, this source of income is now be under great pressure — while at the same time the demands made on charity services are only likely to increase. Two other possible sources of finance for the charity sector - income from investments and corporate donations are coming under similar pressure as well.
So where will charities get the money they need?