UK: Philanthropy: Putting Your Money Where Your Mouth Is

Last Updated: 4 August 2011
Article by Martin Brookes

Martin Brookes outlines the hard work ahead that must be contributed to by government and the philanthropic sector itself to stimulate further giving in the UK.

Peer pressure can be a good thing. In 2009 Warren Buffett and Bill Gates launched their giving pledge to encourage rich Americans to donate the majority of their wealth to charity. Aimed particularly at billionaires, the pledge tries to get people not just to give, but to talk about their giving, and inspire their peers to follow their example. 59 have signed up so far, including Mark Zuckerberg, Michael Bloomberg, and George Lucas.

There has been talk of starting an equivalent UK pledge to boost giving here—but so far, nothing has materialised. Maybe this is because there are no obvious billionaire philanthropists to start such a pledge in the UK. Perhaps we could adapt the format and entice a group of investment bankers to get a pledge started, targeting a larger group of millionaires rather than a few billionaires. Or is this kind of initiative better left to our cousins across the pond?

A UK giving pledge is one of the suggestions in NPC's recent report, Ten ways to boost giving. NPC wrote this report in response to the government's Giving Green Paper, which provided a welcome opportunity to discuss the role of philanthropy in society. Given that many charities are currently facing cuts in government funding, and are coming to rely more and more on individual donations, it seems as good a time as any to put the spotlight on the state of giving.

A look at the stats shows that philanthropy in the UK is not healthy. Giving has been stagnant for decades—despite a significant rise in national income, the percentage donated to charity has stayed at around 0.8%. As we have become richer, we have not given away more. And figures show that although average donation size has risen in recent years, the number of households giving to charity is significantly lower, meaning that giving levels are being held up by a shrinking group of donors. Perhaps surprisingly, there is also no correlation between wealth and generosity—the top 10% of households by income donate 1.1% of their total spending, while the bottom 10% donate 3.6%. All this has left the UK facing a giving deficit, much like the government's budget deficit.

So that means we need to work harder to boost levels of giving in the UK. NPC's recommendations for increasing charitable giving can be roughly grouped into three areas: tax incentives, creating a culture of giving, and improving fundraising. Only by working on all three can we expect to see a significant rise in charitable donations.

The government has an important role to play in continuing to make it easy to give by streamlining the tax process. In his recent budget the Chancellor included two items which go some way to do this. First, reducing inheritance tax for those who leave 10% of their estate to charity removes the tax disincentive for people leaving legacies to charities in their will. And second, changing how gift aid is administered makes it easier for charities to claim gift aid on small donations.

These measures aren't going to change our relationship with charity overnight. They are a step in the right direction, but in order to really boost donations we need to build a culture of giving. There's a role here for government, but also for the media, employers and wealth advisors— making people aware of the impact donations can have, promoting workplace giving and offering matched donations, or talking to clients about philanthropy would be a start.

Charities also need to think about the way they interact with donors, and ensure they look after them properly to keep them coming back to donate again. Donors can sometimes feel harangued by charities, and people who have had negative experiences of giving are less likely to donate again. Charities need to invest in looking after their supporters and ensure that giving is a positive and rewarding experience which leaves donors feeling good and keen to come back and donate again.

The UK likes to think of itself as a generous nation, but at the moment the figures just don't add up. We cannot expect the void left by government funding cuts to charities to be filled by personal giving in its current state. Tax reforms can help, but we can do more. If talking about giving, like Buffett and Gates, can inspire others to give more, then isn't it time to put our money where our mouth is?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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