Cruel Britannia

LSE Magazine, Winter 2000, London

The United States, where President George W. Bush’s focus on faith-based initiatives has sparked significant controversy, is hardly the only nation reexamining government’s ability to provide basic services to the needy. In a speech in January, British Prime Minister Tony Blair reflected on the United Kingdom’s past welfare-state programs: "So much of the policy of the 1950s era failed because it was top-down, paternalistic… Government can’t do it all. Government today is a partner not a master." While Blair’s recognition of failed welfare policies demonstrates courage — especially in light of the Labour Party’s role in fashioning many such policies — it comes at a time of waning private charitable donations in Britain. Paradoxically, donations may have declined precisely because of the welfare policies that Blair now decries.

Karen Wright, research officer at the London School of Economics’ (LSE) Centre for Civil Society, analyzes charity in Britain in a recent issue of LSE Magazine, a biannual publication of global socio-economic issues published by the school. Wright highlights the United Kingdom’s long history of charitable giving, dating back to the Statute of Charitable Uses — enacted soon after the Poor Law of 1597 — which allowed the creation of private trusts to help the poor. Today, a higher proportion of Britons give to charity than citizens in many other Western countries, but Wright’s research reveals that the amounts donated are extremely low. Overall, Britons give less than 1 percent of their annual gross domestic product to charity; U.S. citizens give nearly twice as much. Among young people, donations have declined 25 percent since 1978. Giving small change at street corners seems to account for a good chunk of charitable giving.

The Blair government has set the ambitious goal of boosting the private money flowing to British charities by £1 billion ($1.4 billion) during the next two years — roughly a 20 percent increase over current giving. He hopes to meet this challenge through new financial incentives for donors. Borrowing from the U.S. model of tax deductions, the British government recently passed laws allowing donors to deduct the market value of donated stocks or securities from their taxable income. The government also lifted the £1,200 ($1,700) cap on payroll deductions and has promised to add a 10 percent bonus to all contributions made via payroll deductions through April 5, 2003.

While aware of the role that tax incentives can play in encouraging giving, Wright concludes that any strategy to reverse the declines must build upon long-standing British values of voluntary action and social duty. "The practice of giving must also be understood against a wider backdrop of social and cultural change," Wright argues. "Secularisation of much [of] British society has reduced not only the amount of giving that goes to churches, but also the exposure of large segments of the population to the habit of giving." Indeed, this problem may not be unique to Britain. A September 2000 report from the European Commission addressed low charitable giving across Europe, noting an "over-dependence" of charities on public subsidies and European Union funds.

Unfortunately, Wright’s analysis does not consider whether Great Britain’s welfare-state policies have contributed to the decline in charitable giving. To prevent widespread poverty and disease after World War II, British policymakers created extensive social safety nets, providing food, housing, and medical needs for all citizens. However, scholars warned of the potential unintended consequences of widespread public provision of social services for the poor. Nobel Prize-winning economist F.A. Hayek cautioned against the "anti-moral" effects of state collectivism in his 1944 work The Road to Serfdom, arguing that government charity would dampen the charitable impulses of private citizens. Even Sir William Beveridge, author of the landmark 1942 white paper outlining the welfare state, warned that Britain "must continue to use to the full the spirit… that fired the philanthropists of the past."

Has Hayek’s "anti-moral” society become a reality in Britain? Perhaps. But modern societies are never static. If Blair’s reforms are effective, perhaps the same government that weakened the impetus for charitable giving 50 years ago will strengthen it once more.