The charity conundrum

I puzzled for a while now about how differently I react to requests for charity. Money that is to you and me. It's probably fair to say that I have always given generously and on a regular basis to organisations such as Unicef and others. In fact, about 15 years ago I promised to myself always to give about 2 percent of my after tax income to charitable causes. So far, I kept that promise, with Unicef the most prominent benificiary over the years. One of the most satisfying instances of giving for me was with the Guardian scheme in Katine, Uganda, where every pound was matched by Barclays Bank for five years (check it out HERE, it was an amazing project!). The money was spent on training programmes for schools, midwives and health visitors in several villages in and around Katine and the Guardian and the charity reported annually about progress and difficulties. I enjoyed giving to it since I felt it could make a difference and I had a sense that there are real people at the end of this programme. Also, I thought the money would not be spent on temporary disaster relief but on permenantly building up the community resilience to problems. Sadly the programme ended after five years, perhaps a sign of how effective it has been in improving people's lives there.

This mix of motifs and incentives also lies at the heart of what puzzles me about charitable giving. What attracted me to the Katine programme was clearly the ability to see firsthand that there were actual people at the receiving end, that the money was used to provide them with help to help themselves, and that there was significant oversight and reporting on progress made.

Cut to a street in Liverpool or London in 2017 where I am being approached by someone who asks for a pound. No matter how desperate, homeless or not, I simply would not get my wallet out (before you set off in indignation let me add, I used to give on the street as well). Worse, when being confronted by images of poverty in the UK, homelessness and the like, I feel no pull on the heart strings.

Copyright: Peter Shelomovskiy

Which one would you give to? 

Copyright: Telegraph

So why is this? There is nothing more concrete and immediate than a person standing in front of you asking for money. I know where the money would go and how it would be used if I was to give any. Why don't I feel the same generosity when I am confronted by the signs of UK poverty as it is when I see it in far away countries?

I think it has something to do with the differentials in opportunities between both contexts. I recognise that people can get into all sorts of difficult situations where they need help, either from their own family and friends or from the local community. However, there is a crucial difference between the two environments. In the UK, whatever you think about injustices built into the system there are enormous opportunities for education, training and work with a basic safety net that includes homeless shelters. This highlights, rightly or wrongly, the role of personal responsibility in creating your own destiny. It emphasises how much we are all in the driving seat when it comes to forging our own future.

This heightened role of personal responsibility carries risks of failure for those who struggle to reconcile personal obligations with individual behaviour. In those cases, we are all called upon to help. But the help should be provided, in my mind, by (local) government, not by individual charity.

The situation of a child (or adult for that matter) in a village in Uganda is considerably different. It's position vis-a-vis opportunities is hampered by ineffective or non-existent government services in the first place, due to state failure or corruption. Here it does not matter whether or not anybody accepts responsibility for their own future. The barriers are simply too great to overcome. Charity in this context is mitigating state failures to ensure that they do not translate into personal tragedies.

I acknowledge that there are structural injustices in both contexts which conspire to hold people back. Yet, the fundamental difference remains: where states function well, opportunities, however small, exist. None of this means that we should be heartless or cold towards personal suffering wherever it occurs. It does however tell us something about our own agency and how we behave in the face of need. In the UK, as largely in the Western world, we mitigate need through government and its myriad organisations, stressing the sense of personal responsibility. In the developing world we recognise that the failure of government itself is the main cause of poverty and the lack of opportunities. Personal responsibility does not take you far where state institutions have broken down and do not provide the basic infrastructure to allow you to thrive as a human being. It's there that we are all called upon to help.

Why the living wage campaign is wrong

The main argument for the living wage is that it lifts people out of benefits. Currently there are thousands of people in the UK who work hard and have full time jobs yet receive housing benefit and other state support since their wages are not big enough to make ends meet at the end of the month. In effect, this shifts the burden from employers (who pay wages and through the work of their employees make profits) to the tax payer. The argument of the living wage campaign is that this is wrong.

However, there is another argument that should make us think twice before we introduce the living wage. The income differential between employees is a product of the type of work they do and their productivity. The living wage would force employers to reduce the income differential substantially between those employees who do different jobs in their company.

Effectively, this would distort the incentives for pre-employment education, training and skills. With the living wage, there would be no difference anymore between somebody who cleans the office and somebody who answers the phones. To pretend that both types of work are of equal value is simply not true. Though both should command our respect for hard work, reducing the income differential between jobs in essence signals to young people that further and higher education does not pay.

The danger would be that education does not look attractive anymore in a society where wages are the same for everyone.

Universal benefits to go?

Britain has a long tradition of universal benefits. Whilst some of those are rightly celebrated as a means to lift some people out of poverty and provide a unifying thread across all sections of society, some of them have become a serious challenge to the public purse.

Politicians who question the usefulness or wisdom of universal benefits, such as free bus passes for all pensioners, run into two problems. First, they sound as if they grudge some of the poorest in society the most minimal types of support. And, second, they need to explain how universal benefits can be re-designed in such a way that they are targeted at the most in need. Means testing, the conventional form of targeting benefits to particular social groups, is an expensive bureaucratic exercise whose cost often exceeds the potential savings.

Whilst universal benefits are only minor expenditure items in large budgets (such as that of Central government or England's), for the devolved administrations in Cardiff, Edinburgh and Belfast some universal benefits constitute a major item of expenditure simply because their devolved budgets are smaller and predominantly in those areas that 'host' universal benefits such as bus passes or prescription charges.

The former Scottish Auditor General has now raised some serious concerns about the culture of 'freebies' from devolved governments. In a BBC interview he argues that the demographic changes over the last 2 decades makes a strong case for reviewing some universal benefits. future projections of the costs of universal benefits support his argument. In the long term, some of the universal benefits are simply unsustainable and it appear also morally questionable why millionaires in Wales or Scotland should receive free prescriptions for medication.

The Scottish Labour leader has also floated some controversial ideas about universal benefits, the first time a Labour leader has ventured into this territory. The Welsh government under Carwin Jones has strongly rejected her argument and insists that universal benefits are here (in Wales) to stay. Yet, the Welsh government's case is even weaker than that of the other devolved governments. With a yawning gap in the budget for the NHS (this year alone about £240 million need to be found to save NHS health boards from bankruptcy), and no new funding settlement for Wales in sight, Carwin Jones hopes for a balanced budget are fast disappearing. So far, he has managed to lay all blame on everyone else but the profligacy and mismanagement of his own government, but he wont be able to do this much longer.

Revisiting the extent and usefulness of universal benefits may just be a starting point to reduce the gap in the Welsh budget. The biggest hurdle for this however may not have anything to do with the number crunching, but with Carwin Jones' character. Looking at universal benefits takes political courage and that is not something the Welsh Labour leader is known for.

The real cost of welfare

A couple of weeks ago, John Humphrey's investigated the 'Future State of Welfare' for the BBC. You can find his report  HERE .

He went back to Splott in Cardiff, where he was raised, to listen to the people who have been out of work for years or have never had work. His report is balanced, instructive and eye-opening. While the people who are unemployed get the chance to tell their side of the story in the documentary, listening to them evoked feelings of pity and despair in me. 

Curiously, what was absent from their views was the damage unemployment causes to themselves and their offspring. While they were very vocal in asking for higher benefits and adamant that they would never work as long as they only get a minimum wage, they seemed to reflect little on the fact that being unemployed placed them outside the mainstream of society in many respects with the attendant consequences. 

The debate on social rights has taken a wrong turn somewhere, to the extent that some of the interviewees in the programme were clear that they have a right to be unemployed which we would have to respect. This idea is a strange one. Rights entail obligations. So if there is a right to chose worklessness then there must be an obligation on somebody else to finance this unemployment. The people Humphreys interviewed were clear that everyone else had to support them. 

But what about right of the rest of society to decide whether or not we should carry this obligation in the first place? In effect, what has taken hold in the public debate, and is neatly reflected in the responses of those unemployed mothers and fathers Humphreys spoke to, is a culture of claims made against society coupled with impunity for their own actions. In their view their 'choice' to remain out of work does not entail any consequences for themselves. They are convinced that those who decide to work day in and out (and sometimes for the minimum wage!) have to shoulder the responsibility, not just for their own choice, but also for the choice of the others who are unemployed. 

Yet, this topsy-turvy view of personal responsibilities is not all there is in this confused worldview. What is often less commented on is the damage to their own lives they cause by remaining on benefits. Effectively they are condemning themselves to life without any occupational pension, old age poverty and increased chances of mental health problems. 

Arguably, no one can refuse to observe the main standards of society without detrimental effects to their psychological well being. It is this disregard for their own lives that provides the strongest argument for the radical shakeup of the benefits culture in our society. The people who are damaged most by continuous worklessness are the people who chose to settle into a life of idleness. In a sense, eerily similar to how we treat drug addicts, we may have to save them from themselves.