Thursday, July 19, 2007


The Limits of Charity

I remember back in the eighties when Lawson slashed the top rate of income tax to 40p in the £, The Economist leader welcomed it adding the rider that now rich people had so much more wealth, it was confidently expected they would give much more to charity. This feeble idea owed something to the libertarian thread of liberal economics that taxation was akin to robbing people of their hard earned money and served to stunt their charitable instincts, which should be the sole source of social expenditure. The argument was often buttressed by the suggestion that donors could direct their money to where it would be most effective- unlike inefficient government agencies.

British fat cats have seldom favoured any extravagant largesse. Tom Hunter, Scottish billionaire recently gave £1bn to charity but today Polly Toynbee, reminds us that the UK rich give less than 1% of GDP in charity- a poor percentage compared with the US. That country contains many more billionaires than our own, tax rates are lower and tax breaks are allowed for charitable donations. But at least one example serves to alleviate the cynicism of people like myself. These days I'm a very mild mannered class warrior but I can never quite understand why people, who have become fabulously rich, persist in becoming even richer. Richard Layard and others have shown that, providing one receives sufficient to live a comfortable life, happiness is not enhanced by great additional wealth. So why the striving and the huge effort when one has way more than enough to enjoy the beauties and benefits of life?

At the very least Bill and Melinda Gates have reached this conclusion by donating their Microsoft fortune to their eponymous Foundation, subsequently added to -in squillions- by fellow squillionaire, Warren Buffet(see picture). Their Foundation now donates almost as much to health programmes as the 192 country strong United Nations. So should we abandon taxation and rely on the generosity of the rich who gave so philanthropically during the Victorian era? I think not, for the following reasons:

1. Even allowing for Gates the overall charity take would not be enough to fund the welfare agencies required to alleviate poverty and suffering.

2. Victorian donors were often generous and far sighted but did not remove the most appalling poverty which existed alongside fabulous wealth.

3. Gates and Buffet are exceptions; most rich people are pathetically costive with their wealth. Toynbee quotes the world's richest man(£33bn), Carlos Slim Helu,

"Poverty isn't solved with donations - my concept is to accomplish and solve things, not going around like Santa Claus."

4. Welfare is too important to its recipients, and society as a whole, to rely on the unpredictable generosity of the rich; what, for example, if they decide to terminate their donations? Where would that leave the poor and the needy?

Rather than rely on charity I would like to see a top rate of income tax aimed at the newly mega rich and the ending of tax loopholes and concessions which have led London to become classed a tax haven for the rich and irrevocably greedy.

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