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Stop dissing new ways of giving big gifts, understand them

Fundraising | Adrian Beney | 21 Jan 2010

It's interesting to see that the Conservative think tank the Centre for Policy Studies has commissioned academic Professor Paul Palmer to produce a report on boosting charitable giving.

In his report he has made some wildly optimistic claims about how a couple of changes to the tax system could persuade wealthier people to give billions more to charity. The extraordinary over-optimism in the report is a pity since it has allowed nfpSynergy’s Joe Saxton instantly to dismiss the report which contains at least one important policy suggestion.

Palmer suggests that the UK should implement a system of "remainder trusts" similar to those in the US and Canada. (Please don't go to sleep at this point if you are remotely interested in major donor fundraising – this is important.) 

Why are these trusts important? The answer is simple – people are living longer, the economy is less certain, sending children to university is becoming more expensive, the cost of long-term care is a huge threat looming on the horizon. If you are so rich you don't care about these things then remainder trusts might save you some money but will not make an enormous difference to what you give or how. But if you are significantly wealthy but still have to give some thought as to whether a gift of £100,000 is affordable, then remainder trusts are just the thing.

To save boring you with the detail I shall quote from the advice which "Cambridge in America"  gives to its potential donors about these trusts (paraphrased into UK tax parlance):

“You may receive income tax relief, eliminate capital gains taxes and reduce your inheritance tax. At the same time, you have the satisfaction of making a gift now, while protecting your financial security.” [emphasis mine]

In his response to the report, Joe says “they [the trusts] are virtually inexplicable to all but finance geeks. Although I was chair of the Institute of Fundraising for three years and have three degrees I never heard a decent explanation of how remainder trusts work or why they would appeal to fundraisers.”

Well, Joe, how hard is it to understand Cambridge in America's explanation above, albeit a simplistic one? The purpose of a Charitable Remainder Trust is to enable someone to give to charity NOW at least some of what the charity would otherwise have to wait for until the donor dies. 

And as for appealing to fundraisers, I don't really care about whether these things appeal to fundraisers, I care about whether they appeal to donors. Sure, they are not completely simple – but it seems that a lack of simplicity has long been an obstacle for fundraisers in this country – look at the dog's breakfast we have made of the easy business explaining Gift Aid. (Maybe my next blog should try to do this.)  

It almost certainly the case that tax relief does not feature highly on the list of things which motivate a donor to give. It does feature highly on the list of things a very substantial donor thinks about when deciding how affordable a gift might be and when to make it..

Joe says “We need to see evidence of demand from donors. We need rigorous and well researched arguments.”  I do not believe there will be demand from very many donors – who was demanding Facebook or the iPhone before they burst onto the scene? Now it's hard to imagine life without them.

The whole sector needs to continue to argue in a united fashion for this giving vehicle (Arts, Museum and University fundraisers have been asking for this ten years), and there is plenty of evidence from the United States and Canada. To be brutal, we don’t need someone of Joe’s stature and reputation arguing against this from a position of self-admitted ignorance.

Joe is an influential, well regarded and much appreciated contributor to the sector. He's also a member of the Office of the Third Sector Advisory Group, and he ends his opinion piece expressing the hope that the government is not listening to the Centre for Policy Studies. I think that can be taken for granted, but if there is a change of government at the next election then this may change. 

I hope that Joe will lay aside his long-standing opposition to Remainder Trusts and join those parts of the fundraising sector raising the largest gifts (e.g. the University of Oxford's campaign to raise £1.25bn or the likes of the Director of the British Museum who wrote a piece on this in the Times only last year) who both understand and support the introduction of Charitable Remainder Trusts.

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Who's Who: Joe Saxton