Charities fund tax campaign

The campaign to persuade the British people that they the banks should pay a new tax is backed by charities – but it is funded by them too.

A smart (but rather offensive) reader of Guido Fawkes looked up the “Robin Hood Tax” campaign’s web site, and found that Comic Relief, the charity behind the country’s much-loved Red Nose campaign, had paid for it.

I happen to think the tax is a bad idea, but I accept that plenty of very clever people would like to see it implemented. Whatever your views on the tax, it is reasonable to ask whether this is an appropriate way to spend charity money – even if it is only a small amount of money.

Comic Relief told me:

Comic Relief has a long term commitment to help transform the lives of vulnerable people both here in the UK and across the world’s poorest countries. That’s why we are a member of the Robin Hood Tax coalition and support the opportunity to agree a tiny tax that could potentially generate billions of dollars to help fight poverty in the UK and across the world – from climate change adaptation to health and education for all.  As part of this commitment Comic Relief has supported the campaign by funding the registration of the Robin Hood Tax website.  We  have spent absolutely no money from the public in giving this support.

In order to run itself in a professional and effective way Comic Relief incurs necessary costs. Raising funds, making grants and organisational overheads cost real money. Despite these costs, Comic Relief is still able to promise that for every pound the charity gets directly from the public, a pound goes to help transform the lives of people living with poverty and social injustice. If Comic Relief  raises £20 million, Comic Relief will spend at least £20 million doing just that. It can make this promise because its operating budget is covered in cash or in kind from all types of supporters like corporate sponsors and donors, suppliers, generous individuals and government (including Gift Aid) as well as from investment income and interest.

But money and resources are still being used for something other than Comic Relief’s core purpose, even if that money came from corporate rather than individual donors.

Should it – and a long list of other charities and trade unions – spend any money at all to support the tax? In principle, they are allowed to. Charity law gives them the right to campaign on political issues, as long as they stay out of party politics and the campaigning isn’t their main reason for existence. Clearly many of the charities have a direct interest in a tax with the declared aim of handing out its money for development, climate change, the NHS, education and domestic poverty reduction – even the RSPB is in favour.

However, just because they are allowed to put money into this campaign, does not make it right to do so (the law, in my opinion, is too weak here anyway – why should tax breaks be given to charities to spend the money lobbying government?). Millions of people, and thousands of companies, support the Red Nose projects not because they want Comic Relief to get involved in discussions about taxes, but because they want it to carry on with the work it does helping development.

Furthermore, just because the charities support the campaign does not mean they have any idea what they are talking about, either.

Consider the varied reasons given for their support: Save the Children wants to end “the scandal of child poverty in the UK” (me too). The TUC, the main trade union group, says the “banks fed the crash – a Robin Hood Tax pays back for the damage they caused” (although not as effectively as the Obama tax, which simply levied a charge on the banks according to the size of their balance sheets and allocates the money to pay off the bail-out costs – and what has climate change to do with that?). The Urban Forum says that “bank reform is too important to be left to the bankers” (they’re right, but that isn’t a reason to support this tax, which isn’t about bank reform, but about raising money).

There can be valid reasons to support a Tobin-style Tax, to reduce “excessive” trading by levying a small fee on every international transaction (h/t Cate Long). Many smart people support it, although many equally smart people don’t. The charities do not appear that smart. Consider this gem, from the Salvation Army:

This is a tax on the causes and symptoms of inequality.

No, it really isn’t. It is a tax on international transactions, which could be seen as a tax on financial speculation. Quite apart from the benefits of financial speculation (which can be debated, but is hardly the sole or even main cause of inequality), something cannot be both the cause of something and its symptom. The charities should get back to what they are good at and leave the Tobin tax to be discussed by academic economists.

Some other things wrong with the campaign: it suggests $400bn will be raised, while estimating bank profits before the crisis hit at $788bn.

Either bank profits will be more than halved or the profits don’t come from banks. If the former, it would be disastrous for the financial system, which we just spent trillions propping up. If the latter, who will be paying? You got it: you, me and everyone else. As an aside, I have no problem with reducing bank profits, as I’ve written several times – but by increasing the cost of capital, not the cost of trading.

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Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

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