Joel Joffe: The irresistible urge to give £10,000 to charity

From a talk given by the chairman of 'The Giving Campaign' to the Institute of Charity Fundraising Managers in London

By any standards, and in spite of talk of an economic slowdown, Britain is a rich country. But is it also a mean country? Levels of individual giving over the past seven years have, at best, plateaued at about £6bn, less than 1 per cent of our national income. Growth in individual and corporate giving has in no way matched the remarkable growth of prosperity in the country as a whole where wealth between 1982 and 1997 more than trebled. What is more, successive Governments have significantly reduced personal and corporate tax rates while, at the same time, earnings have vastly increased.

Charitable giving by individuals in Britain is around 0.6 per cent of GDP. It is thought to be in the region of 2 per cent in the US and 1.2 per cent in Germany. And, astonishingly, the better-off give a smaller proportion of their income than those on lower incomes.

Companies are doing little better. Only 9,000 businesses out of 1.3 million enable their staff to help charities through the payroll. This compares to 25 per cent of businesses in the US.

I don't believe that the British are intrinsically meaner than Americans or Germans. But to meet the growing demands we put on the voluntary sector, there has to be a significant increase in giving. In the past, giving to charity hasn't always been easy. Individuals have seen charitable giving as an occasional activity rather than something that is part of their everyday lives. People did not understand covenants and they were little used.

The government has recognised this and has made generous and imaginative changes. Gift Aid, Payroll Giving and gifts of shares make it easier than ever for people to give to charity. Getting this message across to individuals, companies and financial advisers is the next major task.

That is why the voluntary sector, with Government support, has established The Giving Campaign. Our aim is that the level of giving should be increased by at least £500m over the next three years.

We aim to influence people to change the way they give to charity. Currently, only £500m comes from planned giving (eg direct debits and standing orders). The rest comes from legacies – which can only happen once – and from spontaneous gifts or purchases, which do not reflect committed support from the vast majority of donors. The key to this is for people to think carefully about how much they can afford and to give regularly in a tax-effective way.

Take tax relief on giving through the payroll. A monthly gift of £12 from a higher-rate taxpayer is worth £22 to the charity – nearly double. Giving of shares can also raise significant new money for charities at a modest cost to the donor. Yet few people or charities are aware of this.

Individuals can donate shares to a charity without paying capital gains tax. Additionally, they will receive income tax relief on the amount of their donation, a unique double tax relief. A gift of shares worth, say, £10,000, could reduce a higher rate donor's income tax bill by £4,000, and no capital gains tax on any gain would be payable. I am no fundraiser – I lack the courage – but even I could sell that deal.

Speaking for myself, the knowledge that a £10,000 donation to my favourite charity would cost me only £6,000 and cost the Chancellor £4,000, makes it irresistible. When the extent of this tax incentive is more widely known, a lot of others will find it equally irresistible.

Of course, we recognise that people give to support causes rather than to achieve tax benefits. But the ability to increase one's donation with a generous contribution from the Chancellor is a significant incentive to give more. I believe that when individuals realise the value of giving both to them as givers as well as to the beneficiaries and how easy it is to give, they will become as generous as the Americans and Germans.