Editorial: Charity will need some bigger carrots

If next month's tax cuts are to deliver the desired economic stimulus, the Government needs all New Zealanders to spend the extra money in their pockets. The problem is that those most inclined to do this will, by dint of design, receive the least. There is, thus, more than one motive in John Key's plea to people who do not need to spend their tax cuts to donate them to charity. That is not to say the Prime Minister is not serious about developing an

American-style culture of giving in this country. Equally, however, the self-proclaimed pragmatist must recognise that some big carrots will be needed to instil that culture.

During his time in the United States, Mr Key was obviously struck by Americans' generosity. "They are proud of the contributions they make to others. By some estimates, they give twice as much of their incomes to charity as New Zealanders," he told the Philanthropy New Zealand annual conference. Mr Key also noted, however, that this culture had been "ingrained in them for generations". Indeed, the US has always been less egalitarian than this country, with a stronger tradition of private charity and less reliance on the state.

The Prime Minister said this culture continued to flourish because Americans were a wealthier people and because of what he vaguely termed "various policies". These include very generous tax breaks to those who give to charity, which includes endowments to their alma mater or research institutes. There is not the same encouragement in the New Zealand tax system, although the previous Government, egged on by Mr Key, abolished the cap on charitable donations, enabling individuals and businesses to give as much of their income as they wished and claim a rebate.

That sort of tinkering is, however, unlikely to have a widespread impact. Something far more substantial will be required to create an American-style culture here. New Zealanders are a generous people - as a percentage of gross domestic product, we give as much, or almost as much as Britain, Canada and Australia - but like those countries we also have a heritage of social security that regards charity as demeaning and holds philanthropy to be the purpose,

if not the preserve, of the state. When visiting places like the US, many New Zealanders recoil at the practice of tipping, let alone the begging they encounter.

Yet the virtue of charity ought to be encouraged. Mr Key has floated several ideas. It could be made easy for wage and salary earners to donate directly from their paycheque and get an automatic rebate. The tax rebate itself could be paid to the charity at the donor's direction. Rebates could be available also for gifts of goods or time. These could help, though they may not be enough to engender the culture Mr Key envisaged.

That culture would, in any event, have its costs. In his eagerness to see the tax cuts spent, Mr Key seems to be overlooking the greater need to embed a savings culture more strongly in the national psyche. The habits that have left households with high debt and stunted the investment landscape must be addressed. KiwiSaver was a solid step in that direction. Saving and donating to charity may not be totally inimical but they are hardly pulling in the same direction.

It would be wrong to read dark motives into the Prime Minister's quest. He has no apparent interest in dismantling the welfare state. Nor does he appear to have any illusions that the average household budget can spare the extra after-tax income coming its way next week. He is appealing to the better-off recipients of the tax cut. The economy urgently needs them to spend it but the Government may have to give more to get more to give.