Charity, tax relief and the privatisation of welfare

It’s quite something that brings together a Tory Peer, British NGOs including Oxfam and Save the Children, former Lib Dem leader Menzies Campbell, the Universities of Oxford and Cambridge, the Art Fund, Natural History Museum, and many other voluntary organisations and charitable foundations. What has created this coalition of condemnation is of course the government’s proposal to cap the level of tax relief for charitable donations.

One interesting issue to emerge from the debate is what it tells us about the place of the ‘third sector’, ‘voluntary / charitable sector’, or ‘private non-profit sector’ (depending on your favourite taxonomic description) in the UK today. In particular, it points to a growing consensus across the political divide as to the privatisation of welfare and support services in Britain and in international development.

During the twentieth century, Victorian notions of the place of charity and philanthropy (in which they were regarded as an essential part of the architecture of service and welfare provision) were replaced by state-centred models, as the European welfare states gradually took form. The state became regarded as the natural provider of public goods, and charitable organisations engaged in service delivery and assistance for the poor saw themselves as filling in the gaps left by failures in the state system. To an extent, then, the very existence of and need for charitable activity was an implicit criticism of the state: it was state failure that created the need for charity.

This was in contrast to ideals of the strong state in the United States, which placed a heavy emphasis on a flourishing and vibrant non-profit sector. The state was a regulator and overseer, not necessarily a provider. A large non-profit charitable sector was a sign of a strong state, not a weak one as in the case of European welfare states.

The current debate over tax relief is part of a broader shift in the old European model. Increasingly the third sector in the UK is arguing that it is not just there to fill in gaps, but because it can do things better than the state (in exactly the same way that the market became seen as more efficient than the state in the 1980s). The consequence is that programme of privatisation of welfare and service delivery is being given a fillip by organisations who have condemned such shifts in developing countries. That the organisations collaborating in and dominating this process are non-profit charities does not mean it is not privatisation.

One repost will be that charities have very different motivations from for-profit organisations, and are not exploitative or seeking a profit. The question as to whether charities are not exploitative is a debate for another day. But whilst charities may not be profit-seeking in the same way as a business, that does not mean their interests are without any self-serving motivation. The engagement of many charities and NGOs in this debate shows the extent to which they are driven by financial matters and a desire to expand their sphere of activity.

Even if charitable donations have not been used as a means of lowering taxes by the wealthy (and it is clear that this has been the case for some at least), schemes which lower the overall tax take by the state mean that state is less able to fund and provide vital services. Of course charities do not like the proposals: they naturally prefer a system where they can receive money directly for their own work, rather than have to compete with others for a share of the public purse (or, even worse, compete with the state in providing services).

The government’s proposals are (and it saddens me greatly to be forced to agree with Cameron’s government) are quite correct. Charitable giving and philanthropy are tremendously important and contribute greatly to the social good. But people should fulfil their formal obligations to society first. The arguments put forward by the charitable sector should be listened to, but we should not forget that they are driven in large part by self-interest.


About Mike Jennings

I am Reader in International Development and Head of the Department of Development Studies at the SOAS, University of London. I research, teach and write on Africa, and the history and politics of international development in sub-Saharan Africa. Research areas include: - The history of development in Africa, from the late nineteenth century to the current day - Politics of East Africa (Kenya, Tanzania and Uganda) - the role of non-state providers (NGOs, FBOs and self-help groups) in welfare service provision - Social aspects of health, including HIV and AIDS, and malaria
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