The Mehta/Mirrlees Model sets out to raise an additional $75 billion for international development by opening up investment to the private sector, at the same time ensuring that the effectiveness of the money deployed is multiplied through a new accountability to private donors. In so doing, we expect to halve the current global funding shortfall – The tax payer will not have to meet the burden at a time when government budgets are stretched.
Fortune Forum founder, Renu Mehta working with Nobel Prize winning Economist Sir James Mirrlees, have devised a fiscal instrument, The Mehta-Mirrlees model, a global blueprint aimed at transforming the way we in the rich countries help those in the poor countries so that they can work themselves out of poverty and inequalities once and for all.
Resources to meet and surpass the UN Millennium Development Goals (MDGs) are most urgently needed. These goals, which include the reduction of extreme poverty, disease, child mortality, climate change and gender inequality, and the improvement of primary education and maternal health, are recognized to be of the greatest importance. Both public and private funds are being provided to help meet them. Our Model is designed to increase private donations substantially, and thus reinforce the efforts of the governments of the key UN member states to meet, in due time, their MDG commitment of 0.7% of GDP.
Donations can be increased both by enhancing people’s perception of the good done by spending for the Millennium Development Goals; and by increasing the incentive to make donations. Our scheme features both approaches and is explained in the Frequently Asked Questions below:-
Frequently asked questions (FAQ)
I read earlier that your scheme was proposing a 50% tax break to donors as an incentive, which was in effect government matching – so why have you updated the scheme to purely matching donations?
From its inception, the idea has been to use part of the overseas development aid budget to match private donations to meet the UN millennium development goals. The original Mehta/Mirrlees proposal had put forward a way of doing this; to invite taxpayers to make donations, with half the amount deducted from their tax liability. A donor gives £200, and receives £100 tax relief, which is in effect the government's £100 contribution matching the taxpayer's net payment of £100.
In order to accommodate the tax bands that are prevalent globally that are subject to varying fluctuations, we have since developed the proposal. For the sake of clarity this advanced global blueprint has been re-named to the Mehta/Mirrlees Model, which serves as a global template that can be adopted by all UN countries. If the incentive is calculated in the form of straightforward matching, its effect is clear and simple; the Model becomes more attractive to donors and would be easier to implement. A donor gives a net payment of £100, and the government matches the donation bringing the total donation to £200. The donor's net contributions are doubled, therefore greatly increasing the incentive to contribute to international development. These private contributions, along with the matching public funds, should be channelled through a new fund, to be set up by government or the government aid agency. We call this body the Global Development Fund (GDF).
Why do you think that the GDF will do a better job than the existing effort?
The GDF sets out to augment and therefore improve the existing effort. By doubling donations, and channelling them through a trusted body, we seek to create a large multiplier effect to attract donations from the private sector. It would have the responsibility of servicing the private sector, monitoring the effectiveness of the GDF’s expenditures, and publicising their achievements, so as to meet the private sector’s performance expectations. The GDF, in association with the government’s development agency, needs to do a serious job of allocating its funds, and must create monitoring arrangements to provide appropriate incentives for the governments, agencies and NGOs that would receive its funds.
Many countries that have received aid have not developed to at least a sustainable level. What do you plan to do about corruption and excessive administration?
It is widely perceived or believed that development assistance is used inefficiently, with substantial loses to wasteful administration and corruption. That is one of the reasons why donations to these causes are much less than their importance requires. There should not be an additional expensive layer of administration placed above the existing development efforts of the aid agencies. It is rather that some of the monitoring and assessment is the responsibility of existing agencies should be done for and published by the GDF. We recognize that this involves assessing the performance of governments that are in receipt of development assistance as budgetary support. A major aim of the GDF is to make the poorer nations self sufficient so as to work their way out of their reliance on the international donor community to build sustainable economies and in becoming global trading partners.
Who will receive funding and how will performance be measured?
GDF will have a defined giving strategy, funding multi-lateral agencies, NGOs, charities and financial institutions to comprise a balanced portfolio to systemically address the interdependent issues. The emphasis should be on tackling the root causes of the issues and addressing them at every level of society; individual, community, infrastructure services and its governing policy.
The GDF would be designed to ensure that the donors’ resources are delivered at a competitive rate of social return. GDF will have a team of development analysts who will identify a selection of high-impact, ‘top performing’ smaller pioneering organizations alongside efficient blue-chip organizations to comprise the GDF portfolio. GDF should evaluate its own results, to be conducted by independent consultants who are contracted out on a tender basis in order to remain impartial.
What is the ‘multiplier’ effect of GDF funding?
The GDF ‘pooled’ investment has greater demonstrable returns because collective knowledge, involvement, resources, partnerships; geographical and cross-sector interventions bring a return on investment that is greater than small individual grants. The MDG framework constitutes the only credible framework that we currently have which addresses the range of global problems that afflict developing countries and how the international community should respond. Research contracts would be subject to a tender process that would aim to encourage both charitable and commercial advisory organizations to enter the arena. By publishing these outputs in the public domain, the GDF will catalyze stronger consensus within philanthropy and government on the most effective options for meeting the challenges of the MDGs.
Fortune Forum convenes the super-rich; it had been assumed that the super-rich would get a larger level of matching, is this true?
This is a false assumption. All income tax-payers’ donations would receive the same one-for-one matching, in fact most donations would, we expect, come from people with annual incomes below £100,000. The scheme would substantially improve incentives for private donations from all income groups, while not increasing expenditure from taxes.
Will private donors wealthy or otherwise determine how the overall funds are spent?
Conventionally, private foundations and trusts exercise their ability to fund their own giving strategy by directing their donations according to the foundation's mission and governing principles. It is essential that a genuine public-private partnership spirit is created in order to encourage the private sector’s engagement with the scheme. Taxpayers are to be given good information about the GDF’s contributions. All levels of donors should receive attractive metric-based reporting that demonstrate how a single donation can systemically address the issues relating to the MDGs and quantify how much development their money will tangibly support. Larger donors should also have the opportunity to pass on their own funding successes to the GDF, by recommending schemes that have achieved an outstanding impact. These recommendations should be considered by the GDF Performance Alliance group of independent analysts to both determine their funding viability within the Department for International Development (DFID) remit and whether its inclusion would in fact add value to the overall funding strategy. The GDF would not be able to relate its expenditures exactly to individual intentions, but it should be guided by performance outcomes as ranked in the GDF performance index. So, the experts will determine the foreign aid policies, not private donors.
Who can contribute to the scheme?
Under the scheme, private individuals, foundations or trusts and companies are invited to make donations which should be matched by an equal contribution from the government’s aid budget earmarked for matching. Donations can be in the form of legacies. Donations can also come from non-residents, and from funds held offshore. From any type of donor’s point of view, a donation would achieve twice as much as the donation on its own, considerably increasing the incentive to donate.
You’re opening the scheme to trusts and off-shore entities. Is this a good tax dodge for them?
This donation scheme is intended to be separate from the particular tax arrangements currently in force for charitable contributions. Donations made within the scheme would not qualify for any tax relief nor imply tax avoidance. We assert that untapped off shore funds, which are currently not being deployed for charitable purposes, could contribute greatly to global development.
How does this scheme, which sets out to raise billions for international development, not cost the global tax payer?
Matching contributions would be made by the government as part of the Overseas Development Assistance (ODA) budget already in its long-term expenditure plans; a part that, in the absence of the scheme, would have gone to government aid agencies directly and unconditionally.
If the scheme becomes oversubscribed, would the government run out of money for matching private donations?
The government would each year estimate in advance how much of its aid budget should be set aside to be used in this way. It would be wise to have a cap each year on total matching contributions that could be made by government, at somewhat more than the expected level of total matching.
For our list of high-level endorsements, campaign and details of the UN MDGs please go to ‘The Policy ’ page.
