Annex 2
Further evidence in relation to people being
discouraged from creating new foundations because of the high
degree of regulation.
ACF's recent three year research project, Philanthropy
UK, underlined the inhibiting complexities involved in the establishment
of a grant-making charity. Interviews undertaken with 100 people
of substantial means and their advisors, revealed that a fifth
of those who had set-up a grant-making charity had serious reservations
about one or more aspect of doing so. These are published in Why
rich people give, (2004, Theresa Lloyd, Philanthropy UK, ACF)
and three relevant extracts are below:
1. Disadvantages of trusts: I have
a charitable trust fed by Gift Aid. It was a small sum to start
off with, then I made monthly contributions and put in amounts
to top up. It was a sensible mechanism to covenant money each
month and get tax relief. Then Gift Aid came along and I used
it to top it up. It was a convenient way of keeping track but
now it is easy to get tax relief on one-off gifts. I wouldn't
set up a trust again because there wouldn't be the motivation
to go through the process with the Charity Commission. I would
just have a stack of Gift Aid forms. Having a foundation attracts
applications—somebody has to deal with them. (Male, 50s,
self-made)
2. Advice and monitoring by the Charity
Commission: Several interviewees had problems with the Charity
Commission, and its approach to investment policy, especially
where they had endowed their trusts with shares in the companies
they had created. The irritation was compounded if it was planned
to spend the capital: The Charity Commission is an anonymous bureaucracy
. . . there is minimal value in terms of better performance. It
is completely muddled on its investment policy and its diversification
policy. If the government wants new entrepreneurs to put, say
10% of the company into a trust and then two years later tells
them to diversify, why should they set it up like this in the
first place? The Commission shouldn't treat it in the same way
as a pension fund. It behaves as if the money has passed to the
state. (Male, 60s, inherited and grew business)
3. Related publicity: People disapproved
of the lack of privacy associated with establishing a trust. One
contributor who set up a trust in the 70s and now "greatly
regrets" it, commented: Since the government encourages charitable
giving with Gift Aid, one is much better off not setting up a
trust. You could give a fortune to the cats' home and nobody would
know. Charitable activities should be private and one should be
one's own master. There is pressure to be politically correct.
I like the idea of the right to privacy in charity . . . Why should
the public know to whom the gifts go? Information should go to
the Charity Commission and the Inland Revenue. (Male, 60s, inherited
and grew business)
Notwithstanding the difficulties that people
faced in setting up grant-making charities, Philanthropy UK interviewees
recognised the value of doing so—it encourages a strategic
approach which helps to make spending effective, and represents
a major commitment to philanthropy as a principle.
In addition to the draft Bill, several recommendations
in Private Action, Public Benefit being pursued outwith the legislative
framework underline our concerns about barriers to the development
of the grant-making sector. In particular:
— Recommendation 18 with the
requirement for a Standard Information Return focusing on how
a charity sets objectives and measures its outcomes, and Recommendation
20 to strengthen the focus of the SORP on achievements against
objectives, organisational impact, and future strategy could both
result in grant-making charities becoming risk averse. The SORP
framework has to recognise, as part of grant-making charity strategy:
risk-taking; benefits that only emerge over the long-term; and
funding projects with benefits that are difficult to quantify.
— Recommendation 34 requiring
annual reports to include a statement of procedures for recruitment,
induction and training of new trustees could tie the hands of
those family foundations that wish to appoint from within the
family, and new philanthropists who need to be allowed to start
with small, familiar boards of trustees.
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