19 Comments on Fred, the rich and compulsory good causes

david ramsay on Mon, 2nd Mar 2009 6:05 pm


Picking up on Matthew’s point about a quarter of income above £250,000 going to charity it is a perversity that an organisation such as the Citizen’s Advice Bureau has a veritable tsunami of people going through their doors desperate for advice on all the issues of the day – debt, home repossession, redundancy etc etc and yet they are underfunded, work on a shoestring and rely to a large extent on volunteer help. For many they are a lifesaving port of call and the demand for their free services will only increase for years to come.

How about taking the idea a step further and proposing that the most profitable company in any one year gives a share of its profits towards sustaining and resourcing the CAB? Or should the government just come clean and increase the meagre funding it allocates to the CAB?

Mike Amos-Simpson on Mon, 2nd Mar 2009 10:12 pm


I’d be interested to know what the cost will now be in legal fees, and the various staff time and resources to try and prevent him from taking his pension.

I think the idea of a ‘charitable tax’ for income above a certain level is appealing – though of course I will never be in the situation of having to pay such a tax so I would say that! I think there’s merit in applying something similar to company profits too.

It might be useful to broaden the beneficiaries from ‘charitable’ to something more along the lines of being of ‘benefit to society’ (albeit with a stricter definition than that) – but in such a way as to recognise that setting up a business that employs people is valuable too (and there are many charities about which their value to society is questionable). So maybe some sort of list of things that are felt to be for the benefit of society but the mechanism for how this is to be achieved is flexible so that those that have talent in business can still maximise their skills, knowledge & networks (and of course that tax/donation) but with the aim of meeting those benefits rather than pure profit.

matthewtaylor on Tue, 3rd Mar 2009 8:46 am


I hope I’m not exposing my ignorance here but I am less worried about companies making profits than individuals pocketing huge salaries. If a company is a PLC then its performance will be reflected in share prices, which is good news for millions of pension savers. And profits can also provide the basis for future job creating investment. Having said which, you are, of course, right about the strain on CAB and other money advice services. I have blogged in the past asking why so little of the Government’s stimulous package is going down to local government and the community sector rather than propping up banks and the car industry.

Thanks for the comment

matthewtaylor on Tue, 3rd Mar 2009 8:57 am


Thanks Mike. I agree that a lot of charitable activity is far from impressive. Many moons ago I blogged about this and commended the work of New Philanthropy Capital an organisation which subjects charities to tough scrutiny before recommending them to potential backers. I also agree that we should encourage the well-off to invest in new business, but the question is; if such investment is likely to succeed would’t they want to do it anyway and if it’s not should the state be encouraging it.

joe on Tue, 3rd Mar 2009 9:20 am


I’d say the root of the problem is the profit-hungry capitalist system. The fact that so many of people’s pensions are gambled on the profitability of corporations is not something to celebrate.

Mike Amos-Simpson on Tue, 3rd Mar 2009 10:01 am


This topic stuck in my mind for some reason last night. My thinking is not so much that its just business or just charity (or just both) more along the lines that somehow its determined what the needs of society are – so for example lets say the following are identified: education, child poverty, supporting local produce & manufacturing. These could be ranked according to the perceived need of priority and shortfall in being able to meet them effectively.

The ‘tax’ on excess profits would have to be used towards meeting any of those needs. How thats actually achieved is within the control of the person/company responsible for those excess profits. It may be that they simply donate to a charity or non profit in an appropriate sector – but it may be that they choose to take action themselves – perhaps by integrating new opportunities or services within what they already do, perhaps by setting up a new enterprise – it doesn’t matter so long as the objective is primarily to meet one of those identified needs.

The needs would of course change – so at another stage it might be that employment, healthcare, medical research become top of the priority list and excess profits announced at that time would be directed instead towards the current priorities.

I think something along these lines would help ensure money is being put to good use and not in obscure charities set up for personal interest. It would also encourage an entrepreneurial approach to tackling current needs. There could also be an element then of ‘sharing success’ – so where companies/individuals do announce huge profits it would be known that this will be of benefit to more than just the individual – so rather than begrudging others success we recognise that their success is important.

I’m sure there’s many flaws in the thinking, but the principle of what I’m getting to is some sort of compromise towards supporting and encouraging those who are very financial successful to continue to be so, but in a way that is seen to benefit society but that gives them some ownership or influence of how that works – rather than a robbing the rich to feed the poor type approach.

re. your last comment I agree that where theres profit it will probably happen anyway and so that should continue. But here its about shifting the prime motive so that the prime aim of ‘excess profit projects’ is meeting the need of society. This might include initiatives that are not sustainable but go towards meeting the need, it may also be that some projects happen to become sustainable or profitable, but the prime purpose would be in meeting the need.

joe on Tue, 3rd Mar 2009 10:33 am


Mike – I think I see where you are going, but what is to stop the highly paid just becoming non-domiciled and moving somewhere else?

It would be interesting to know what percentage of tax originates from the super-rich. I suspect not very much.

Mike Amos-Simpson on Tue, 3rd Mar 2009 11:10 am


@Joe – yes I see that although I think in the context of the idea it needs to be regarded as a separate issue to be tackled. Very right though that if the super rich don’t actually generate much excess wealth that can actually be taxed its not going to make much of an impact.

Michael in UK on Tue, 3rd Mar 2009 1:37 pm


I think everyone should stop calling it a pension, which gives a veneer of legitimacy that is undeserved, and the sum involved is completely removed from any ordinary meaning of the term. It is a bonus payment, a contractually agreed (probably) end of contract bonus. He had worked at the bank for 30 years, but his decsions left it close to insolvency, requiring a collosal governemnt bailout.

Personally, I would like to see a legislation to try to recover these and similar payments to other bank/finance top managers. It would be extraordinary, but no more so than so much else in the crisis. I think we have to hope that President Obama annonces his intention to do this, then our Government will decide they are up for it too.

It was funny reading reports that that Alastair Darling was *shocked, shocked* that rich people sent money to Switzerland to avoid paying tax. At this rate we will have Gordon Brown arm in arm with Vince Cable, “Vince, I think this is the beginning of a beautiful friendship…”

matthewtaylor on Wed, 4th Mar 2009 8:33 am


Hi Mike. I think your idea is great. The problem – and think it is pretty big – is how would you police such a flexible system? We have an industry of people who advise others on how to circumvent tax rules (and, worse, legitimise that circumvention). If you didn’t have a simple way of determining whether the money was being spent in the right way (like it going to a certified charity) you would either have to have a very intrusive verification system or accept high levels of avoidance.

I am on Moral Maze tonight so I might float my ‘compulsory charity of your choice’ idea there

matthewtaylor on Wed, 4th Mar 2009 8:36 am


OK, if you oppose capitalism per se then that’s fair enough. But if not the idea I don’t think there is anything wrong with the idea that we use our savings to finance enterprise and that – within limits – we gain from that investment being successful. But we do need cheaper, more transparent and more responsible investment vehicles (the aim of RSA’s Tomorrow’s Investor project)

matthewtaylor on Wed, 4th Mar 2009 8:47 am


Thanks Mike. I agree with you but I also think we need to make sure our anger doesn’t obscure the role many of the rest of us played in the crisis (my old friend Matt Cain has described this best http://blog.matthewcain.co.uk/the-financial-downturn-is-my-fault/); not because I want us all to feel guilty but because the lessons of all this go beyond the fact that we should never regulate the likes of Goodwin ’til the pips squeak.

Mike Amos-Simpson on Wed, 4th Mar 2009 9:20 am


@ Matthew that would be an honour

I agree monitoring would be the biggest pitfall – just as the industry exists to help people find and use loopholes (and no doubt would extend to a scheme like this) there would need to be some sort of regulator/industry devoted to trying to prevent avoidance and monitoring that there’s a genuine intent to meet the identified need. There is stuff that could be adapted from the CIC regulator, but I’d suggest theres much better merit in any case in investing in the effectiveness of how money is used and actual outcomes of initiatives rather than the regulation of charitable structures. At a local level for example I know of many projects where an investment in an individual would have considerably more effect than forcing them to adopt a complex structure in order to access funding – so it may be that the way charitable work is monitored would benefit from a rethink anyway?

It would be interesting to see how you could actually draw up a kind of running table of the most urgent needs of society over time (preferably without political interference), so there’s also a profession here. Probably the biggest question is whether the amount of surplus cash that could be raised is sufficient to support these new professions/industries as well as the actual projects/activities, but on the basis it would lead to activities that are not currently happening I’d assume it is.

I agree re. the personal responsibility point too – I think there’s a broader issue related to that of a general lack of personal responsibility in this country (in the US too judging from Obama’s speech). Part of my work involves asking groups of young people to identify who is responsible for issues and problems in their local area – very often the first response is “the Government” – even for the smallest things. That said I do question the wisdom of the Governments apparent solution of being to encourage a return to the kind of situation that contributed to the problem in the first place – particularly the very detrimental effects at the moment towards people who have saved rather than borrowed money.

Mike Amos-Simpson on Wed, 4th Mar 2009 9:23 am


ps. it is also worth mentioning that there are very rich people who are already willing to invest time and money along these lines anyway – Bill Clinton, Richard Branson, Bill Gates to name a few very high profile ones – so it could also be possible to get people like this on board with a view to encouraging people to adapt it as a measure of success rather than a tax to avoid.

Ned Hercock on Wed, 4th Mar 2009 3:42 pm


the left should be shouting that there is no difference

david ramsay on Wed, 4th Mar 2009 7:05 pm


Matthew’s comment 4. I disagree with what you say about not worrying about profits. I think there is an opportunity to re-balance the basic equation to include automatic social/community benefit away from the sole mantra of shareholder benefit in its current definition. Adjusting the fundamental equation is not rocket science to use the cliche. Profits are fine but they need to include this benefit for the common good – as a matter of course. I think the overall rebalancing that accepts less profit ( there will be no choice in the short term) and social benefit can sweep up the issue of excessive salaries and bonuses as they will be seen as totally out of context.

matthewtaylor on Fri, 6th Mar 2009 8:41 am


Hi Mike
Sorry I haven’t got time to respond at length. It is worth noting that this Government has done a great deal to promote philanthropy, including changes to the tax regime and funding research and campaigns. There was growing interest in what Matthew Bishop and Michael Green dubbed philanthrocapitalism http://www.philanthrocapitalism.net/. However I think overall levels of giving have not risen much despite these efforts and who knows what will happen to philanthrocapitalism after the crunch. Also, notably several of the US’ biggest rich givers wrote a letter opposing Bush’s last round of tax cuts to the rich

matthewtaylor on Fri, 6th Mar 2009 9:03 am


Between what and what?

matthewtaylor on Fri, 6th Mar 2009 9:06 am


I agree David. This is one of the thoughts behind our Tomorrow’s Investor project, which aims inter alia, to ensure that our pension savings are used to enforce responsible capitalism http://www.thersa.org/projects/tomorrows-business/tomorrows-investors.

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