Why taxpayers should stop supporting charities

Too many non-charitable charities are getting public money, says Merryn Somerset Webb. If you want to save the red squirrel, knock yourself out. But don’t expect the rest of us to pay for it too.


Red squirrels: cute, but are they really a charitable cause?

There isn't that long to go until Christmas. That means I'm already getting buried in a pile of invitations to charity shopping mornings. I love these. I love almost everything to do with Christmas. I love all the handmade crafty stuff and the luxury stuff that you buy at these events. And I love the social aspect of shopping among a group of friends.

But there's one aspect of the whole thing I am not so sure about the charitable aspect.

Many people will have seen the story in the press last week about salaries at the big charities.Jasmine Whitbread, the chief executive of Save the Children, appears to be being paid £234,000 a year. And she is only one of 20 employees at the charity making more than £100,000 year. This isn't unusual. The head of Marie Stopes International gets £290,000, for example.

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You might think this is perfectly reasonable after all, charities need talent as much as big companies, and talent costs money. But I wonder how much else you know about the charities sector as a whole. I suspect everyone should read a new book from David Craig: The Great Charity Scandal (out on Amazon soon). It is not, as he is at pains to point out, an attack on charity itself (this is definitely a good thing). It is an attack on the UK's charitable system which has allowed not far off 200,000 charities employing more than a million people and spending some £80bn every year.

What are the main charges against them?

First, massive duplication and inefficiency. What's the point in having Breakthrough Breast Cancer, Breast Cancer Care and the Breast Cancer Campaign if they all have to prepare their own accounts and have their own very expensive bureaucracies? Why aren't they forced to merge? And why are there at least four charities (and possibly more I got bored of looking them up) devoted to red squirrels?

Second, the fact that so little of what they raise goes towards actual charitable expenses. I know of some charities who spend more keeping their final salary pension schemes (these are still bizarrely common in charity land) on the road than on their advertised activities. The pay problem is becoming increasingly common, too.

And third, what we think of as charitable activities are not the same as what many charities think of as charitable activities. Far too many of our big charities spend significant percentages of the cash we give them on political campaigning think Oxfam (which spent more than £20m on this last year), the RSPCA and the RSPB rather than helping the poor and sick (which, surely, is the point?).

None of this would particularly matter if the charitable sector was funded entirely by the post-tax income of private individuals. But it isn't. According to Craig, 27,000 British charities are reliant on the government for three-quarters of their income.

And all charities are reliant on the taxpayer one way or another. We (and the EU) give them direct subsidies (£137m to Save the Children last year, says Craig). We give them tax relief on all their income from donations and investment returns, and capital gains tax relief too. And of course, we give them Gift Aid.

I've written about this before(seehere, here, and here), but every time you tick the Gift Aid box, the Treasury has to dig deep to reallocate tax (to the tune of around £1bn a year) already paid into its coffers to your favoured charity: at the margin, the money flows out of the hands of our struggling NHS and into the seemingly bottomless pit of squirrel problems.*

Worse, the state has no control over the activities of these tax-revenue receiving organisations: they get our money and can do more or less what they like with it.

The key point is this: there are too many charities being at least part financed by the state which are not and should not be on the taxpayer's priority list. We need to pay for the basics of good government before we pay for anything else.

So if we must have tax relief for charities at all (and I am not sure we should) it is, as I said last year, time to distinguish between what is a charity that fits into the brief of the state and is hence a tax-revenue deserving charity, and what is not.

Soup kitchens? Yes. Cancer research? Mostly. Macmillan Cancer Support? Yup. Literary festivals? No. Opera? No. Theatre? No. The Brownies? No. Youth clubs in deprived inner cities? Yes. Donkeys? No. Red Squirrels? No really, no. Think tanks? No. Save the rhino? No. Private schools? No (a voucher scheme would be better). Personal/family foundations? No. Horse sancturies? No.

You get the idea. If you are in any doubt, read Craig's book.

*Oddly it isn't only people but charities who don't seem to recognise that Gift Aid is a transfer of cash from the taxpayer via the government to the charitable sector. Here's one charity on the matter: "The Red Squirrel Trust does not receive government or any other funding, so money to keep the charity running comes from donations, sponsorship, fund-raising, gift aid and grants." What, I wonder, do they think Gift Aid is?

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.