Monday, 26 March 2012

Using the budget to encourage volunteering

The UK government debated its annual finance bill on 21st March (commonly referred to as Budget Day).  Amongst the initiatives and changes outlined by The Chancellor, George Osborne, was a cap on income tax reliefs.

In practice this would mean government would limit the amount of tax relief an individual can claim in any year to a quarter of their income or £50,000, whichever is higher, from April 2013.  The intention of the policy change is to stop the well-off dodging tax via making charitable donations.

The response of the voluntary sector has been swift and firm with six sector umbrella bodies immediately writing to The Chancellor expressing concern about the impact this change would have on the propensity of the wealthy to make major gifts to good causes.  According to Third Sector Online, the letter states that:

"There is a clear danger that this measure could have the unintended consequence of disincentivising the donation of large gifts to charity. Charities rely heavily on major philanthropy of this kind, and any reduction in giving could be devastating for many vulnerable people who rely on our services. The measure is also clearly at odds with the government’s commendable efforts to promote philanthropy, sending the wrong signal to major donors who have thus far been encouraged to give more."

Indeed some sector leaders are arguing that the Giving Summit planned for May 2012 is "in danger" as a result of this change in policy.

Put aside for a moment the question of whether the voluntary sector should be lobbying against a policy that limits tax breaks for the wealthy in order to help the public purse and thus support those who are less well off.

Put aside the uncomfortable feeling that the self-interest of those organisations who gain from the big gifts of the wealthy seems to be dictating a policy that is being pursued in the name of the whole sector, a sector where relatively few organisations gain from such gifts but many are working hard at the coal face to help fight the effects of inequality.

Put aside the fact that yet again the sector's leaders seem totally fixated on cold hard cash as the only resource with which the sector can do anything, to the extent that panic ensues when they risk losing some of it.

Instead, consider whether there could be an opportunity here.  Over on Volunteering England's Dialogue App I've made a suggestion for how the sector could be a bit creative with this financial policy change from the government.

My idea is that some of the income tax relief for the well-off are restored in return for time given. So instead of the relief being capped at a quarter of their annual income or £50,000, whichever is higher, if someone gave £10,000 of their time to a good cause this cap could be raised accordingly.

I'm the first to admit that I'm no tax expert and so there may well be issues with this suggestion that I am unaware of.  Equally, there would need to be agreement about the value accorded to someone's time, a system for recording and verifying the hours they volunteer and some way of ensuring their time is donated by them to genuine good causes.

But those problems don't seem insurmountable and consider the benefits.

Such a scheme could:

  • Help maintain major gifts be restoring higher level of relief for those most likely to give big gifts
  • Draw in additional human resource to work on social problems as these people give their time as volunteers
  • Help to change the mindset of the sector that cash isn't the only way to get things done
  • Help promote new models of 'skilled' pro-bono style volunteering as the people likely to be affected by the proposed changes to income tax relief are wealthy business people who may well have considerable professional expertise to share through their volunteering.

Surely it is worth some consideration?

Ami Bloomer at Give What You're Good At has flagged two of her blog posts that link quite nicely with my proposal.  The first outlines the arguments for and against tax relief for pro bono (volunteering) work and the other argues that skilled volunteering is a great way of engaging major donors and encouraging them to give.

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