How charities benefit the rich; and why fat cat charity bosses now pay themselves as much as £3 million a year, while their organisations reap huge benefits from the taxpayer.
When you think of charities, you think of philanthropic bodies doing good works… helping the sick, the elderly, the poor. But should you also think of them as rich, multi-national businesses with fat cat bosses, who are just as greedy as the rest of them?
Hi. I’m Leon Hawthorne. We’re talking about charities and the difference between the public perception and the reality of what they are.
There are thousands of charities up and down the country, whose staff and volunteers are tireless, selfless people, inspired by a good cause, who put their time and talent into helping others.
In total, there are: - 167,000 charities in England and Wales. - Employing 1.1 million people. - With 3.6 million volunteers. - And income of £72 billion a year.
The Charities Act of 2011 is the law that defines a charity as a body that provides public benefit, specifically for:
- the prevention or relief of poverty - the advancement o the arts, education, culture, science, sport and religion - the advancement of health or the saving of lives… and several other categories.
The government gives charities special treatment in the tax system, so when you give money to a charity, it can claim an additional 25% of the sum donated under the Gift Aid scheme.
- Gift Aid costs the government £1.3 billion a year. - Charities get relief on Business Rates worth £1.8 billion a year. - They don’t pay VAT, worth £300 million a year. - And they get £280 million in relief on Stamp Duty. - That’s £3.7 billion going directly to charities.
And individuals who donate to charity also get major tax perks.
- £880 million in relief on inheritance tax. - £480 million to higher rate taxpayers using Gift Aid. - £70 million relief when you give property or shares to a charity. - And £40 million through the Give As You Earn system, through which employees donate via the payroll. - That’s a total £1.5 billion, effectively subsidising your donations.
So, what? That’s taxpayers’ money going to good causes. Why is it something to worry about?
Well, just how good are some of these causes, especially the ones that get the biggest tax handouts?
Firstly, I must point out most charities are pretty small, and they survive, hand to mouth. Half of them have income less than £10,000 a year. It’s only 6% of charities that earn more than £500,000 a year. And this top tier gets 90% of all the tax handouts.
Take Eton College. Perhaps the most prestigious private school in the world, charging £36,000 a year in school fees. It’s a registered charity with annual income of £69 million and net assets worth £374 million.
Eton is a great school. 22% of the pupils are on a scholarship or a bursary, meaning their fees are heavily reduced - in some cases - to zero. And the school has a kind of outreach programme where they help raise standards in local state schools.
But come on. However, you dress this up. This is still an elitist institution mainly for the rich and privileged. And they will be getting millions of pounds in tax benefits because of the charitable status.
Let’s take a look at executive pay among charity bosses. The excellent Third Sector Magazine has analysed the Top 100 charities and found average CEO salary was £255,000.
In at Number 3, it’s the Royal Opera House. Yes, it’s a charity. Its Music Director, Sir Antonio Pappano is singing all the way to the bank with a pay packet of £740,000.
At Number 2, it’s Nuffield Health, which has private hospitals and gyms across the country. Its boss’s bank account is in rude health with earnings of £1.25 million a year.
And Top of the Charity Pops is the Wellcome Trust. The body that funds medical research paid one executive… wait for it… a healthy £3 million, making him the highest paid person in the charity sector.
Now, I’m sure all of these people are very smart and very able. But if they want to earn that kind of money, they should be working for a merchant bank or a FTSE 100 company. Not for a charity that is subsidised with taxpayers’ money.
The fundamental meaning of charity is to help the poor and the disadvantaged. In my opinion, something cannot be a charity if it services primarily the wealthy and privileged.
It’s time to take away all their tax benefits unless they conform to substantially stricter rules, including a cap on executive pay.
I’m Leon Hawthorne. Thanks for watching.