A ‘Citizen Endowment’ for an active and balanced democracy

The Ideas Factory is a chance for you to pitch your own idea of what should be in the next Liberal Democrat manifesto. The proposal here is not the policy of the Social Liberal Forum. We will however be passing it – and the response it generates – onto the Manifesto Working Group.

The Proposal

Ed Randall: The author of Supercapitalism, Robert Reich, who was Labor Secretary in the Clinton administration, brilliantly explains how the ways in which we behave as consumers and investors have given rise to a monster. The monster is eroding community and civic virtue, undermining citizen involvement in democracy and destroying democratic accountability. Although his analysis is stronger than his prescription for invigorating democracy his book contains the seed of a policy idea that should appeal to Liberal Democrats. It certainly appeals to me.

On page 224 of Supercapitalism, in what reads like a throw-away line, Professor Reich suggests, and this is my paraphrase: a way to redress the imbalance between commercial lobbies – which have run out of control and invaded the space for public policy making and democratic debate – and citizens, who struggle to see the point in taking part in a ‘democratic’ system where parliamentarians and legislators are easy meat for the lobbyists and the PR skills of lobbyists who are overwhelmingly funded by commercial organisations with seemingly bottomless pockets.

The proposal is for what Reich calls a tax credit, I’m calling it a citizen endowment for an active and balanced democracy. The citizen endowment is a small part of the tax that any consumer, worker and/or investor pays each year. In Reich’s proposal it is $1,000 credit. In mine it is £100 – but that represents an opening bid. The endowment would amount – in the first instance – to about double the fee that a British
political party might charge for membership.

The money for citizen endowments would be placed by the tax authorities in a public fund replenished from tax receipts annually. Every citizen, who is registered as a voter, would be able to nominate an organisation to receive up to £100 from the fund each year. Money that was not committed at the end of twelve months would become part of Exchequer receipts available for meeting the costs of public spending programmes. There are likely to be a number of restrictions on the organisations that can be recognised and approved for receipt of the citizen endowment but, in the UK, we have considerable experience of regulating charities and the problems of identifying appropriate recipients of citizens’ endowments are not insuperable. Organisations that qualify would need to show that they were capable of representing citizens and representing their values.

Recipients of citizens’ endowments might, for example, seek to increase the incomes/earnings of the poorest, campaign for the abolition of higher rate tax relief on pension contributions, introduce legislation to reduce tax avoidance, alter the classification of cannabis. The list is almost endless. The citizen endowment could even go to political parties. If use of citizens’ endowments, as a source of funds for political parties, were to be permitted then funding for political parties from corporate donors, trades unions and private individuals would either be prohibited or tightly controlled. After all we believe in one person one vote and we should also be campaigning for one citizen one citizenship endowment/political contribution.

The recipients of citizens’ endowments would have to be not for profit organisations, but the choice of organisation would be for individual citizens. The objective of the citizens endowment is to provide each
citizen with an opportunity to influence the terms of public debate and to increase political engagement when, as Anthony Downs once observed, ignorance, from the perspective of the ordinary voter, is quite rational.

I am convinced that this proposal would introduce a new and powerful democratic dynamic into British politics. It could also help pave the way for controls on money in politics, which did not come from individual citizens, greatly diminishing the undemocratic influence of purely commercial interests.


Richard Huzzey: I can certainly see the attractions of this for solving the problems of party funding and lobbying. Yet I don’t like the idea of state funding of political parties and I don’t follow whether this would be an addition or replacement to commercial lobbying?

It seems to me that the problem of commercial influence is tied more to their donations to political parties or the shady ‘consultancy’ activities parliamentarians are permitted – as highlighted in the recent Lords-for-hire scandal. I’d have thought that shutting down those avenues was more effective than creating a compulsory charitable endowment, which would throw up questions of its own. Would scientific research charities be excluded if they did not take part in lobbying for government, for example? Is this a £100 poll tax on every individual, or would you cut some other portion of current taxation (in which case, wouldn’t this money be better used reducing class sizes)? I don’t mean to disagree with the corrupting effect of lobbies on the entire political system… I’m just not sure this will address the key issues, as superficially attractive as it is.

As an aside, I’ll have to look at this book as I’d have thought an active consumer identity is similar or identical to active citizenship.

Chris White: Essentially this is state funding for the voluntary and political sector; the fact that it is in the form of a tax credit does not really disguise this.

There is already state funding for both sectors. All this does is give a little influence to the ordinary citizen over where the money might go. It is not clear that most of us would actually bother to nominate (but then it falls to the exchequer so the money is not lost). The rest may care to nominate to the usual bunch of charities and political parties.

There’s the rub: the Charities Commission does indeed have a track record of regulating charities and weeding out the unsuitable. But there is no track record of successfully discriminating between ‘sound’ political parties and those that step outside the mainstream consensus. We tend to rely on a fudge: big parties with seats get money (Short money, freepost etc). Small parties without seats get considerably less and in that way the state funding for undesirable parties like the BNP is reduced.

There is a Liberal dilemma here which may become acutely uncomfortable if our collective resources are made so freely available. The public revulsion at the public funding of the far right or the far right could bring the scheme into considerable disrepute (and there are worse parties than the BNP).

There is also a huge practical problem. Revenue and Customs has shown itself particularly inept in dealing with family tax credits. Do we really expect that this amazingly complex scheme would fail to collapse under its own bureaucracy?

James Graham: As someone who, in a work capacity, has been making the case for a similar model of state provision for political parties, I am more sympathetic to this idea than my colleagues above.  I don’t think this necessarily be an overly complex scheme – GiftAid has proven itself to be easy to administer.  You simply cannot compare the relative complexity of this system with the monster that is the tax credit system.

As for worries about funding the far right (and other distasteful organisations), I would have thought that could be covered by insisting that any organisation eligible upheld the the anti-discriminatory principles of a Single Equalities Act (something which we may yet get in 2009).  That won’t stop the Daily Mail from fulminating about lesbian charities getting funding from it, but I can live with that.

Ultimately there remain two problems: the first is that while this may help us develop a more active citizenship, it would not be a panacea.  Parties, charities and other non-profits would still try to get to get as much money out of people for as little effort as possible.  Participation costs (even if the internet is bringing the price down) and there will be plenty of people out there who would rather continue as passive consumers than active citizens.

The second is where I agree with Richard and Chris: how would we sell it to the public?  I don’t think the argument would be unwinnable, but I would want to see more work on it before it became a manifesto commitment.

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5 comments on “A ‘Citizen Endowment’ for an active and balanced democracy
  1. Jock says:

    So, it’s a tax increase that each individual can nominate a charity for it to go to within a year or loose the opportunity? Or would it be out of current tax receipts? Sort of “redistributing” the ability to donate to good causes?

    I don’t think I could support that. Nice as it sounds to encourage people to support charitable bodies, the whole thing about donations is that you give freely, from each according to his ability – the widow’s mite is as important as the philanthropist’s millions.

    I would also fear for charitable bodies’ other fundraising abilities. Even moreso than the National Lottery I think this proposal if implemented would discourage people to give outside of this system.

    I don’t think it would re-engage people and communities any better than now – what does that is much more “viral” in the marketing sense – of people persuading others within their own sphere of influence to support causes voluntarily, to be convinced by the cause. And I think there are better ways of doing that that having some quasi-compulsory donation system. It seems to me that things like social networking sites get people to join causes, then eventually one would think to donate to causes they see are active and worth supporting outside of Facebook or whatever. I could see this being a bit like letting the customer behind you in Tesco have your ClubCard points because you don’t have a ClubCard – it’s a “you’ve got nothing to lose” sort of trasnaction.

    But if it does go forward as policy, then I think you have to define more tightly what you might mean by “non-profit”. ie Do you genuinely mean charitable works that do not generate money and rely solely on donation to do necessary good works or would you include social enterprises – the often so-called “not for pprofit” sector which are trading businesses that do in fact aim to make a profit but use that profit for good works in some way? And if the latter how far would you go – social enterprises that have investors who share in the return even if less than they would out of a fully commercial profit distributing corporation?

  2. David Heigham says:

    Somewhere in here is a very good idea, but I cannot yet pin it down.

    All that I can see so far is a row of people who would set up impecable charities/good works foundations with immensly appealing names (e.g., Foundation for Lost Babies, Happy Life Association)designed to attract the eye of the uninformed. All taxpayers would be pushed towards nominating some organisation or other; these would aim to be the others named by the majority who don’t know their way around the charitable field. The objective of my row of people would be to run their organiations inoffensively, and collect a nice lifetime salary plus pension as Directors of them.

    Lets work on the idea until we cynics are convinced.

  3. Tino Rozzo says:

    I am a Democratic Socialist/Social Democrat. I believe in fighting Poverty. I advocate the Universal Income. Upsetting, many wish for a Basic Income. I advocate a Living Wage/Universal Income. Here in the USA.
    My Goals now are fighting for Rent Control. Here is what I need, thank you for your help.

    In Europe, what arethe laws protecting people from Gentrification, Homelessness, and the right to live in your land. Here in America we are losing our homes to the wealthy. They also use eminent domain, a law that allows business to steal homes from home owners.

    Tell me about Human Rights laws in the EU. I am drafting a Constitiutional Amendment. The war on Reaganism/Thatcherism lingers.

    In Solidarity
    Thanks Mates.

  4. Richard Coe says:

    This is a sound idea – but before we bore the public silly with more paper how about we just cap donations tightly? Individuals only, no businesses and an annual limit that that might be donated by an enthusiastic supporter on say double median wages – say £5k tops.

    Currently we have all sorts of people Lord Ashcroft and Russian billionaires who George Osborne wants to get money off. They are able to do this by channelling their cash via their UK business interests.

    Labour is sadly shooting themselves in the foot by not taking action on this or fair votes sooner.

  5. Paul Perrin says:

    A massively flawed idea on several levels.

    The idea or taking money from people when you don’t even know what it is for is horrific.

    Simply leave the money in the pocket of the taxpayer and let them decide if they want to give it to a charity/cause that they support… Simple.

    Recently a local family held a sponsored walk to raise £2000 for the funeral expenses of their 21 year old son who unexpectedly died of cancer.


    To think that that a family like that could have had £2000 taken from them to be spent on one of your approved ‘endowment fund’ project and just handed to the exchequer if not used turns my stomach.

    Equally bad that their friends could also have money extorted in taxation for the endowment fund so be less able to contribute to something they hugely wanted to support.

    The mentality that thinks extorting money from people because you can spend it better it morally bankrupt and repugnant. It is sad to think supposedly educated people can even think in these terms.

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