Universities and charity


Here’s a weird, but hardly novel, controversy: Charity tax row: Oxbridge joins revolt.

The Oxford and Cambridge vice-chancellors wrote privately to Chancellor George Osborne saying his plans risked undermining the culture of university philanthropy. UK universities, which raised some £560m from charitable gifts last year, want him to rethink. Ministers want to stop tax avoidance. Mr Osborne says he is shocked by thescale of legal tax avoidance by multi-millionaires. Under current rules, higher-rate taxpayers can donate unlimited amounts of money to charity and offset it against their tax bill to effectively bring the amount of tax they pay down, sometimes to zero. But from 2013, uncapped tax reliefs – including those on charitable donations – are to be capped at £50,000 or 25% of a person’s income, whichever is higher… An Oxford University spokeswoman said that the government’s own policy emphasised the role of private and philanthropic investment, rather than the public purse. “A step that penalises the government’s own approach seems ill-considered.”

Hmmm. How about this alternative statement:

The university’s own justification depends on its promoting self-consistent argument, rather than specious self-serving sophistry. “An argument that contradicts the university’s own raison d’etre seems ill-considered.”

Let’s think this through:

  1. The government wants philanthropic funding of universities to replace public funding.
  2. Under current law, contributions to universities (and other charities) are matched by a 40% tax rebate for higher-earning taxpayers, so 2/5 of the costs of nominally “private” contributions are actually paid by the taxpayers. The government proposes to cap this subsidy at 15% of income or  £20,000.

Do you see the contradiction? Neither do I. In a time when the government is cutting funding for all manner of worthy projects, it seems pretty undemocratic to effectively allow wealthy citizens nearly unlimited access to the treasury to support their own favourite causes. The £560 million in charitable gifts last year presumably included more than £200 million in “gift” from the government. Whether or not this is a good thing, it seems troubling, as a point of democratic principle, that control over these £200 million has been passed from the citizenry at large (in the person of their elected representatives) to the infamous “one percent”.

Now, the tax offset is not absurd, and there are some arguments one could make in its favour: The more cynical is that, by subsidising donations to acknowledged worthy causes, we encourage the wealthy to invest their money in those, rather than buying the MPs directly to get tax relief. The less cynical is that this is a way of leveraging public money by giving the wealthy philanthropists the illusion of a bonus. It’s a common trick these matching funds, but does it work? I don’t know. I remember all the public radio membership drives in the US that went on for weeks, where every other hour or so the contributions were being matched by some deep-pocketed donor. I never found it persuasive, but maybe other people did. I expect that the matching funds bring do bring in extra money, but I doubt that it is nearly as much as the 40% subsidy. In any case, this is an empirical question about the psychology of wealthy donors, one that people could reasonably differ on, and that could be investigated with methods of social science.

There is quite a lot of folk psychology in the veneration of the plutocrats by the institutions sustained by their bounty. Like the way colleges maintain luxury appurtenances (such as 18th century silverware, which, in addition to the money it could bring in by being sold, entails substantial personnel costs for cleaning and polishing), arguing that donors or potential donors would disapprove of “selling the family silver”. (Funny that in this context we’re a family. The rest of the time everyone’s claiming we should act like a business…) I would have thought that someone interested in donating money to their alma mater would seek assurance that we are spending everything we can on improving education and the student experience, perhaps also on research and the general intellectual environment of the college. The capacity of the flatware to absorb free neutrons and moderate a fission chain reaction would, I’d have thought, be a lower priority.

Now, I don’t actually agree with the government’s policy to reduce public funding for universities. I wouldn’t even be surprised to learn that the Oxford University spokeswoman and even the vice chancellor himself disagree with the government policy, and believe that more government funding for universities, and for this university in particular, would be a good thing. But their argument, that the policy contradicts their decision to reduce government subsidies for private gifts, is simply an embarrassment to their institution, and to academia generally. (For instance, it is obvious that wealthy philanthropists are much more likely to bestow their gifts upon a very few elite universities. Whether these elite universities are particularly deserving of public subsidies is a matter for democratic debate, not for the wealthy to decide by fiat.)

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