Tuesday, 17 April 2012

Supporting culture through charitable gifts - putting ICE in the drink

Recent news coverage of the UK Government's ill thought through cap on tax relief for private charitable donations made me consider the motivations for giving and the impact of this measure on the GLAM sector.

Sir John Ritblat, chairman of the Wallace Collection in London, who also supports the British Library, the Tate and the Royal Academy of Music said: “Many of us are breaking our necks to help so many organisations, and we don’t want to be branded as tax dodgers. This will discourage people from giving. I’ve got several substantial matters in which I’m involved and I will be seriously reconsidering.” [The Telegraph]

Nick Poole's excellent piece in the Guardian covers the issue well and I wont rehearse his arguments here again. I recommend it as important reading to understand the issue. One thing to add is that Governments of all stripes use taxation and the avoidance thereof to influence behaviour in the populace. ISAs are to encourage personal savings and at the weekend I did a bit of tax avoidance to maximise the value of my giving by gift aiding my entry to a castle.

My research on American Art Museums (funded by the Andrew W Mellon Foundation) shows museums get the most revenue from the membership, admissions/ticket sales, shop and retail activities and fundraising.  Many of the smaller museums (in terms of budget and attendance) rely upon membership and an annual fundraiser for a very significant proportion of their revenue. Endowments are an important backbone to many American museums. So charitable giving, by the rich and the not so rich, are essential to museums operational revenues in America and the tax breaks there support this type of giving.

The UK sees a similar profile to museum revenue as well and it's not just museums who benefit. In 2008, Julian Blackwell donated £5 million towards the redevelopment of the New Bodleian Library in Oxford. Recently, the British Library raised £9 million to buy the St Cuthbert Gospel, the earliest surviving intact European book through a combination of the National Heritage Memorial Fund, charitable trusts and the public.The Arcadia Fund is a wonderful grant-making fund established in 2001 based on the private wealth of Lisbet Rausing and Peter Baldwin. As at May 2010, Arcadia had awarded grants totalling $192 million - that's a lot of private giving! Arcadia's key mission is to protect endangered culture and nature and if you look at the grants given they are underpinning many library and cultural programmes.
It is worth noting that a cursory web search does not reveal the same amounts for the archival sector or for local libraries - some of the GLAM sector is relatively more glam than others it seems for charitable giving. We need to encourage more across all the sectors.

So why do the wealthy make charitable donations? ICE!

By GenBug
Consider having the financial wealth to give over a million to your charitable favourite. In such a circumstance, you would naturally want as much of this money to go where you choose.

In many respects charitable giving is the metaphorical ice in the drink. Ice adds value to the drink. But if tax rules change to make the giving no longer about the ice, but to actually reduce the amount of drink the giver has, then the giver will start to reconsider their options.

When I say ICE I mean that wealthy people give charitably for three core reasons: Ideology, Conscience and Ego.

Ideology = giving because you care passionately about the thing you are supporting.

Conscience = giving because of a sense of duty, guilt or possibly even an embarrassment at being so very wealthy.

Ego = giving because it makes you feel good, enhances your prestige or to be loved for the sheer size of your largesse.

So how does the ICE in the drink of the wealthy match up with real world circumstances?

Liverpool's experience

In 2008 National Museums Liverpool did a full economic impact assessment. They found  that: "during the Capital of Culture period, 25% of all visitors to Liverpool visited the Walker Art Gallery, 24% visited the Merseyside Maritime Museum and 15% visited World Museum, while about 5% of visitors only visited a National Museums Liverpool venue and no other attraction during their visit. In total, National Museums Liverpool is reliably estimated to be worth £115 million to the economy of the Liverpool city region, a spend that supports 2,274 full-time jobs".[Report]

In that financial year they had an expenditure of ~£22 million, of which their accounts suggest they gained £763,000 from "charitable activities" with a further £70,000 in unrestricted funds from "grants and donations". I could be reading the accounts wrong, but it seems that a small proportion of their expenditure is currently supported by donation and charitable giving. The UK tax payer is thus providing the best part of £21 million to fund this museum. I would posit that the impact, the value and the excitement this wonderful museum offers is worth it!

Boston Museum of Fine Arts Experience

2008-9 was a tough year financially for the Boston MFA according to their annual report and accounts. However, their charitable giving was in the region of $6.4 million in relation to an $86 million expenditure. The Boston MFA has vanishingly little taxpayers money supporting it, but it does have an endowment worth $409 million on June 30, 2009.

More ICE in the drink?

It leads of course to the question, is supporting culture best directed by the individuals who give when supported by tax breaks which reward the giving or should the Government take those taxes and redistribute them? Well, this assumes a zero sum game where only one way can successfully support culture - this is just not true in my opinion. The American system supports giving to support culture - the rate of charitable giving experienced by Boston MFA is more than double (as a proportion of total income) that experienced by National Museums Liverpool even when their endowment lost 20% of its value in the crash. I am of the opinion that we should be doing both - support culture through tax break encouraged giving and also redistribute through the central taxation system.

We have to remember the motivations of the givers is to add ICE to their drink. We need to accept that as beneficiaries we can best support this through encouragement, not by taking some of their drink away from them.

Please note: by "drink" I don't presume alcoholic beverages, I'm not accusing all wealthy folk of being lushes ;o)

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