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Zeitgeist boosts the sector’s chances in the Budget

In recent weeks I have been to two excellent events where people tried to work out what they would like out of the Budget on 21 March. One, convened by NCVO, tended to focus around the paper they have recently produced arguing the case for a fairer tax treatment of social investment. The other was more from the philanthropy end where the tax treatment of ‘giving while living’ was the hottest topic.

In both cases there was a galaxy of well-informed people who knew the problems that the current treatment was causing them and could see that with just a flick of his pen, the Chancellor could open up the Elysian fields—and that whatever the cost of the tax break, the benefits would swamp them many, many times. And I am sure that some of that it true.

But sadly for me, I have spent many years sitting on the other side of the fence. Every year in my life at the Treasury and at Downing Street, the coming of the Budget meant the coming of the special pleading. Indeed, in other spells as a special adviser at Education, DTI, CLG and Transport, I would often be involved in trying to sort out the lobbying of those august central departments on behalf of my secretary of state.

Swamped with pitches, how do officials, let alone ministers, separate the chaff from the wheat? Well, a tax official from HMRC will see potential loop-holes being created everywhere. Even if the tax change proposed does not in itself open up that loophole, if it sets a precedent that other sectors may march into, the tax man will be ultra-cautious.

Treasury officials, on the other hand, tend to focus on seeing if the tax change might be  value for money. I am afraid that hard-edged Treasury man and woman does not take kindly to proposals with no costing, no estimates of benefits, no estimate of distortions created and so on. Believing that your proposed tax change just is a good thing is not enough.

Unless, of course, you have the political zeitgeist with you. Now at that point,  advice often goes out of the window. When I was a young economist in the Treasury, both the chancellor of the day and his special adviser got so keen on the idea that profit-related pay could transform the economy that a tax break opposed by almost all in the Treasury was brought in—only to be withdrawn a few years later as having been a paradise for accountants with no impact on outcomes.

So the charitable sector is in with a chance. The NCVO ideas about a fairer playing field for social investment relative to normal business investment must surely be at the starting gate for consideration. And the Coalition has made so much noise on philanthropy that some more moves (on top of some pretty big ones already) may be in the offing.

One word of wisdom though. The more the sector works together, the better the chance of success. If one charity sees dangers in a tax change around gift aid, for instance, then those officials who never liked it can say the sector is split. If  those who advise philanthropists want a change that charities think will hurt them, then its chances of success go down a lot.

The 2012 Budget is unlikely to bring us all lots of good news. With a bit of good work, some help for the social sector could be one of the better bits.

Dan Corry is CEO of New Philanthropy Capital and a former Treasury and Downing Street adviser.

  • Ray Mitchell

    This is a very informative and interesting (okay, depressing as well) posting. I think it would make a great article in Thirdsector magazine!