Labour's "donations from the rich" plan is a stunt, the numbers don't stack up

Camden Labour's idea to get voluntary donations from the local rich to mitigate the cuts is a stunt. Let's get some things clear.

Of course we all want to encourage people to contribute more to charities locally. Arguably the tax system should do more to support this.

If the local authority starts making a major effort to raise voluntary donations from local people to fund what are currently council activities, it will very likely end up in competition for donations with local voluntary groups - from Hampstead Theatre to community centres - who are hard at work raising funds. It will be difficult to ensure that additional donations are really additional to current charitable donations and don't cannibalise current charitable giving.

The example floated by Labour in the CNJ talked of 100 bankers paying 5p in the pound to raise £500,000. It may very well be that there are 100 bankers with £100k average bonuses who would pay this. But while £500,000 would save a couple of libraries, and I don't doubt the importance of that, it doesn't actually make a big impact in a situation where the council is looking at making savings in the revenue account of over £80m over three years, and it's wrong to give the impression it would.

A more realistic calculation would be to think about what it would take to raise £5m, year in, year out - still a small proportion of the £80-100m budget gap, but a bigger chunk of it than £500,000.

Let's say you ask "rich people" to pay, say, an average of £1,000 a year, to be funnelled by the local authority to local services like libraries and lunch clubs, Perhaps some people would pay a lot more than £1,000. But £1,000 is still a chunk of money, even for most affluent people. But if we assume £1,000, and we want to raise £5m, then that means getting voluntary donations from 5,000 households. That's about one in twenty of Camden households. How likely is that? Everybody has different financial situations, but some of those living in more expensive properties in Camden are pensioners, with property assets but lower incomes. Others have got children in private education and heavy childcare costs, and at least in their minds have got a lot of outgoings.

Remember, what we're talking of here is revenue support, where you need to bring in money every year, not as a one off exercise to raise capital for a new building. And bank bonuses, however unacceptable, are not guaranteed over future years; they are dependent, at least to some extent, on market conditions.

Whatever the challenges of council spending at present, do those most concerned about libraries, or adult social services, really want these to be funded from uncertain flows of voluntary donations?

I really don't blame Labour for raising the point. The more people donate to good causes, the better. But Labour's idea is rooted in the age-old Labour idea, that money from the rich - whether raised in taxation or from donations - can fund an expensive welfare state. The fact is, this option never existed and doesn't now. Whatever marginal tax rate you set, there simply aren't enough rich people to pay for spending. Ultimately it's the hardworking middle classes that have to pay for high state spending, and, over time, for structural deficits that aren't attended to.

So yes, our voluntary sector organisations should step up their efforts to raise more money from the local rich. But no, Camden Labour shouldn't invest significant council officer-time and resources, and the hopes of local people, in what is ultimately a chimera. The numbers just don't stack up.