Why the unhealthy relationship between charities and the state must end
10 June 2014
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Economic Theory
Regulation
Trade, Development, and Immigration
4 November 2024
Like many others, on Sunday evening I watched Soccer Aid – an annual charity football match featuring well-known ex-footballers and a raft of celebrities. All funds raised go to Unicef, to provide vulnerable children around the world with life-saving food, medicine and clean water. Given the alignment of this good cause with my interest in football, I happily contributed a modest sum towards the £2.1 million raised from the public.
I was troubled, however, by how the other half of the ‘donations’ was raised. The commentators told us (to paraphrase): ‘each one of the hard-earned pounds you choose to donate will be matched by the government’. Initially, I thought this incredibly generous of David Cameron, Nick Clegg and co. Then I realised what it meant. Taxpayer funds would be used – also coming from our hard-earned pounds.
This is a tiny fraction of state spending, of course. And for most people, I suspect, it’s the sort of thing they imagine our aid budget should go towards. But it does raise important questions: where should voluntary charity end and compulsory taxpayer-funded aid start? And what are the implications for civil society institutions of having money directed to them by politicians, as opposed to raising funds from individuals directly?
This is especially pertinent since the government has decided to try and avoid its new 5p plastic bag charge being called a tax by saying that the funds will be diverted to charitable organisations and ‘good causes’. But it’s difficult for something to be labelled charity when it’s enforced by the state. And when charities become dependent on this revenue stream, there’s every incentive to lobby to either increase the charge, or to push for new charges on perceived harmful activities to maintain their funding.
In fact, there are significant concerns surrounding taxpayer funding for the large and growing element of ‘civil society’ that tends to be more politically active. My colleague Chris Snowdon has documented the rise of ‘Sock Puppets’, charities through which the UK government funds the lobbying of itself on issues like public health, the environment and welfare. The journalist Ian Birrell has outlined how the coalition’s IF Campaign for increased foreign aid spending was ‘created by charities in collaboration with the politicians who were the purported target of their pressure’. Think tank New Direction found that the EU spends €7.5 billion (£6.1 billion) every year on large NGOs, with eight of the biggest environmental NGOs receiving at least a third of their income from the European Commission.
This is bad both for the public and for charities. Bad for the public, since state-funded charities often use their funds to lobby governments for economically illiterate policies that will damage the economy and lead to a higher tax and regulatory burden. Bad for charities, because dependence on politically-determined funding risks their independence, the crowding out of voluntary giving, and threatens the sustainability of their financial position given changing political priorities.
Charities play a vital role in a flourishing civil society. But voluntary giving and the ambitions of politicians should be separate. This means leaving activities that can be undertaken by civil society outside state interference wherever possible, and limiting the ability to lobby for those charities who receive significant state funding.
This article was originally published in City AM.
I was troubled, however, by how the other half of the ‘donations’ was raised. The commentators told us (to paraphrase): ‘each one of the hard-earned pounds you choose to donate will be matched by the government’. Initially, I thought this incredibly generous of David Cameron, Nick Clegg and co. Then I realised what it meant. Taxpayer funds would be used – also coming from our hard-earned pounds.
This is a tiny fraction of state spending, of course. And for most people, I suspect, it’s the sort of thing they imagine our aid budget should go towards. But it does raise important questions: where should voluntary charity end and compulsory taxpayer-funded aid start? And what are the implications for civil society institutions of having money directed to them by politicians, as opposed to raising funds from individuals directly?
This is especially pertinent since the government has decided to try and avoid its new 5p plastic bag charge being called a tax by saying that the funds will be diverted to charitable organisations and ‘good causes’. But it’s difficult for something to be labelled charity when it’s enforced by the state. And when charities become dependent on this revenue stream, there’s every incentive to lobby to either increase the charge, or to push for new charges on perceived harmful activities to maintain their funding.
In fact, there are significant concerns surrounding taxpayer funding for the large and growing element of ‘civil society’ that tends to be more politically active. My colleague Chris Snowdon has documented the rise of ‘Sock Puppets’, charities through which the UK government funds the lobbying of itself on issues like public health, the environment and welfare. The journalist Ian Birrell has outlined how the coalition’s IF Campaign for increased foreign aid spending was ‘created by charities in collaboration with the politicians who were the purported target of their pressure’. Think tank New Direction found that the EU spends €7.5 billion (£6.1 billion) every year on large NGOs, with eight of the biggest environmental NGOs receiving at least a third of their income from the European Commission.
This is bad both for the public and for charities. Bad for the public, since state-funded charities often use their funds to lobby governments for economically illiterate policies that will damage the economy and lead to a higher tax and regulatory burden. Bad for charities, because dependence on politically-determined funding risks their independence, the crowding out of voluntary giving, and threatens the sustainability of their financial position given changing political priorities.
Charities play a vital role in a flourishing civil society. But voluntary giving and the ambitions of politicians should be separate. This means leaving activities that can be undertaken by civil society outside state interference wherever possible, and limiting the ability to lobby for those charities who receive significant state funding.
This article was originally published in City AM.
3 thoughts on “Why the unhealthy relationship between charities and the state must end”
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I call taxpayer-funded handouts to so-called charities ‘coercive charity’ — in contrast to voluntary (or ‘genuine’) charity. We can all agree that people temporarily down on their luck may benefit from charity, in the same way as people who are permanently disabled — though in the former case the charity will presumably be temporary and in the latter case permanent. But is it desirable for either kind of charity’ to be coercively financed? I think not. What reason is there to suppose that we the public as taxpayers willingly allow tax revenues to be raided for such a purpose while being unwilling ourselves to contribute voluntarily?
Quite simply, money raised by tax is not and can never be termed charitable. Tax is money demanded with menaces, tolerated only because it is necessary; using tax to fund sockpuppet organisations is dishonest, deceitful and really must stop; indeed it may already be technically illegal under the anti-bribery laws.
What about the unhealthy relationship between “Thinktanks” and corporate interest lobbying? You know, like the tobacco companies that have been linked to your group. Guess that’s why you aren’t really the most transparent organisation when it comes to funding and conflict of interest.
PS> Was funny watching how uncomfortable you were today trying to dodge the issues Piketty has raised. Pretty weak Ryan. Looked like a “sock puppet”