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Lord May of Oxford: My Lords, I speak in strong support of the proposition that charitable remainder trusts be introduced in the UK, as advocated by the Institute of Philanthropy and others, and I should declare at the outset a range of interests in so far as if such a scheme were to be implemented, it would clearly benefit Oxford University where I work, the Royal Society with which I have a rather direct association, and a host of other universities, learned societies and other charitable institutions with which I have less direct association.
The noble and learned Lord, Lord Lyell, introduced the debate with an admirably clear description of how charitable remainder trusts work and of the great benefits they bring to charitable institutions in the United States. He also acknowledged the costs to the Exchequer which I have reason to believe are relatively small compared with the benefits.
My enthusiasm for such schemes derives from the 16 years I spent at Princeton University as the vice-president for research before moving to Britain in the late 1980s. Twenty years ago, charitable remainder truststhey are known by different names in the United States and there is a more complex array of possibilities, some of them legally much simplerbrought to Princeton something like $50 million annually, along with other forms of giving; they were just one of many forms of making donations. Goodness knows what they bring in today, but I am sure that it is more.
When in 1997 I became the Chief Scientific Adviser to the Government on their election, I had a meeting with the Chancellor to speak of my enthusiasm for the scheme, and captured his attention. He referred me to his officials, but after a decent interval for reflection I received a letter from Treasury officials explaining in a rather condescending tone that there would be costs to the Treasury for such a scheme, and essentially telling me to mind my own business. The general tone was that this was a disreputable thing to be talking
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about. I wish I had kept the letter. It spoke eloquently of a culture that did not look outwards to the experience of other countries.
So I warmly welcome today's debate. I believe that charitable remainder trusts in the United Kingdom could convey benefits that go beyond the excellent and obvious one of large injections of capital into universities and other institutions in the charity sector. They have an additional purpose in that by providing an incentive to giving, they would help to change the UK culture towards the significantly more philanthropic one found in the United States. I find it a perpetual puzzle that in the US, both at private and at public institutions if you come from out of state, people pay what seem to us huge sums of money for their education and emerge with a sense that they have not paid the full real cost, and there remains a lifetime engagement. In this country, however, as is the case in my own country, Australia, people take for granted an essentially free education and emerge from it with little or no sense of indebtedness. So such a culture change is greatly to be encouraged and is something almost separate from the specificity we are talking about. But I believe that it is an important ingredient in helping to bring about a culture change which I think the Government wish to see and certainly have every reason to want for societal reasons no less than for the financial ones.
Lord Neill of Bladen: My Lords, I speak in this debate for reasons similar to those of my noble friend Lord May of Oxford. I have past experience of fund-raising, essentially in three areas: the first was for a hospice; the second was for a learned legal institute that could not keep going without charitable donations; and most important, in my experience, on behalf of the University of Oxford. We embarked on quite a major campaign of fundraising when I was there. Apropos of what has been said so eloquently by my noble friend Lord May of Oxford, one thing we realised when we started fundraising was that the mental attitudes of our Oxford graduates were about 800 years out of date. Everyone assumed that their education was free, that they owed nothing and would have nothing to put back.
So we studied the American experience, which was extraordinarily illuminating. Even more breathtaking is the size of the funds raised by individual universities. My noble friend referred to Princeton. The figures for Harvard are huge. Experts carried out a survey on our behalf that gave us comparable figures for the Ivy League universities, and not just for them. An enormous amount of money is raised for these bodies, which are an essential prop of our civilisation.
While I am not making a particular appeal on their behalf, I shall underline the problem. The needs of the universities for charitable giving are acute at the present time. So also are the needs of those who are sick. The medical and cancer charities are in desperate need of continuous funding, as are the churches which are falling down. The need for money is huge, and here
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we are being told about an instrument for raising money which has operated for many years in the United States and seems to work very well. The advantage from the donor's point of view is, of course, the retention of the right to income during the lifetime of the donors should they happen to nominate themselves as beneficiaries. That, they will get. But, as the noble and learned Lord, Lord Lyell of Markyate, pointed out in introducing the debate, the donors tend to establish a link with the charity. That can lead on to more giving and participation in the life of the institute or hospice which needs the donations. So it is not simply an impersonal giving of money; it can lead to personal contact.
If there are objections to this, we want to hear from the Minister what they are. Are they objections of principlethe sort of fears voiced by the noble Lord, Lord Best, about fat cats establishing some racket out of this new type of giving? It seems highly implausible, but, if there is an objection of that character, it ought to be brought out and exposed. Or are the difficulties merely of a technical nature, which could be solved by people of good will sitting around a table and working out the details? If the problems are merely technical, they should be resolved. We all want to hear why the Government would not welcome this as a new instrument in the armoury of charitable giving, the demand being so huge and the willingness to give being very apparent.
Lord Phillips of Sudbury: My Lords, I thank the noble and learned Lord, Lord Lyell of Markyate, for introducing this important short debate. I also thank the Institute for Philanthropy. I should add the name of the Lifetime Legacies Coalition, which has done so much to highlight the importance of this subject and to advocate the virtues of the proposal. I am sorry that we are not going to have the wisdom of the noble and learned Lord, Lord Browne-Wilkinson, tonight, but at least we know that he is listening in to our deliberations.
I should declare my own interests as a partner of Bates, Wells and Braithwaite, which acts for quite a number of the charities and bodies that are part of the Lifetime Legacies Coalition. Also, as trustee of various charities and chancellor of the University of Essex, I was particularly sympathetic to the remarks of the two noble Lords who spoke latterly.
The noble and learned Lord, Lord Lyell, set out the case clearly. He spoke of America, where £110 billion has apparently been given under this scheme. He spoke of the 3 million British people who have free assets at a level where they might well take advantage of the proposed reform. He convinced me that there was little or no revenue disadvantage to allowing the proposal. He said the tax problems were superable.
The noble Baroness, Lady Cumberlege, gave us the example of the city academies that might benefit from this proposal and emphasised the incentive to be generous. The noble Lord, Lord Best, usefully concentrated on the issue of abuse, because with tax
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reform abuse is always, rightly, the first consideration of a government. From what he said, and from what I know, there is no reason to suppose that there would be substantial abuse here. I add my own small thought: one might well give the remainder charity the right to appoint a trustee during the lifetime of the settlor donor, which would be a direct way of ensuring that there was no abuse.
The noble Lord, Lord Hodgson of Astley Abbotts, reminded us of the debates during the passage of the Charities Bill, in which he and I were only too involved; he is right that this measure would be slap bang in the middle of the Government's own stated ambitions for charity. The noble Lord, Lord May of Oxford, with his great experience of both Harvard and Oxford, was right to talk about the need for a culture change and the possible benign impact of this reform upon that. I could not agree more with him. One has to take into account the fact that we have the bizarre situation of a declining level of giving in terms of the real wealth of the nation, and the even more bizarre fact that the top 10 per cent of earners give less as a proportion of their income than the bottom 10 per cent. We need to break out of this frankly not very flattering culture. In his contribution, the noble Lord, Lord Neill of Bladen, agreed with what the noble Lord, Lord May, had said.
I will add only a couple of thoughts. First, accelerating the prospect of significant generosity has a number of effects that are not obvious. I speak now as a long-in-the-tooth solicitor who has often seen old people who have lost their confidence and their sense of independence, are becoming enfeebled, whether intellectually or physically, and are losing the spirit of generosity which, if it had been allowed to express itself earlier, would have led, I have no doubt, to bold gift-making. These trusts allow just that. One has to acknowledge the reality that people who live in an extremely materialist and competitive world and give away a lot of money want these days to feel that they get some esteem or recognition for it. We might all wish that we were purer in our motives, but that is the reality. A man of 50, allowed by this proposal to give a major gift to a named institution, would expect, and would get, esteem and recognition, as well asdare I say it?an involvement with the charity so benefited. That is amazingly infectious. I find clients who have been generous are always delightfully surprised at how much the connection then means.
Secondly, to allow this reform would be a coping stone for the tax reforms that have been bipartisan in this country. It would be enlightened self-interest for the Treasury, for every pound given to charity is geared up immensely by the volunteer effort that always comes in behind it.
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