Philanthropy is more important than ever. To quote the Charity Commission Chair, Orlando Fraser KC: "many charities and their beneficiaries will be relying on increased philanthropic giving simply to survive". However, for many individuals and businesses looking to make a difference and 'give back' to society, it can be difficult to know where to start, and there are often concerns about how one's philanthropy and altruism will be perceived.
In this article, we explore some of the issues that might cause aspiring philanthropists to hesitate, and look at what is on the horizon for philanthropy in the UK.
The importance of philanthropy
Philanthropy has always been at the heart of the charity sector, and it is more important than ever in the wake of the pandemic, with the cost of living crisis and charities struggling with rising costs. The sector's importance to civil society cannot be overstated, and yet many charities are facing significant gaps in funding and struggling to survive.
On 26 January 2023, the Law Family Commission on Civil Society published its report 'Unleashing the power of civil society' following a two year process of research and consultation. The report emphasises the importance of both individual and corporate philanthropy, explaining that "philanthropic and grant funding have become increasingly important to the social sector as they play a unique role in enabling innovation, risk-taking, patient experimentation and organisational development" and that "businesses are a valuable and underused source of funding and skills".
The emphasis placed on philanthropy in this ground-breaking report is echoed by the Charity Commission. At the Beacon Philanthropy Forum in November, Charity Commission Chair, Orlando Fraser KC, spoke passionately about the importance of philanthropy and encouraged the wealthiest in society to be more philanthropic, as he said that "many charities, and their vulnerable beneficiaries, face an existential crisis in the months ahead". He described philanthropy as "a different kind of engine to public funding, one that drives public good in a distinct way", and commented on the capacity of individuals to make a huge difference:
"High-net worth-individuals have huge potential to enable charities to grow and develop beyond their current capability. To help our sector improve to better meet the needs of beneficiaries in the UK and around the world."
The challenges of cynicism in philanthropy
The importance of philanthropy for charity cannot be overstated. Yet, there is evidence that charitable giving by the top 1% is reducing, rather than increasing. Mr Fraser explained:
"Our hosts today, the Beacon Collaborative tell me that while the top 1% give around £2-3bn a year, that generosity is concentrated to a small proportion of the richest. It is considered that the £2-3bn figure come largely from only 20% of individuals in that top 1% – so 80% of the top 1% are not contributing meaningfully to that figure."
For many individuals who are in a position to engage in philanthropy, whether personally or via their businesses, there is often an understandable hesitation given the way in which many philanthropists are publicly criticised or called out as having ulterior and selfish motivations. Mr Fraser also recognised these difficulties and sensitivities and encouraged a room full of charity leaders to "praise those who do rather than assuming that their motives must be cynical or self-serving". He commented:
"I do believe that, over recent years, there has been an unhelpful tendency to malign philanthropy and philanthropists. We have a culture in which people are scrutinised because they are giving, and giving publicly. We have seen scrutiny that supposes giving must be motivated by cynicism, by an attempt to 'whitewash' a bad reputation, or to obscure nefarious deeds, or to increase an individual's power. This feels misguided."
A recent example of bad press for philanthropy is the Charity Commission's investigation into the Jim Ratcliffe Foundation, which was reported in the press last month. The Guardian article questioned the public benefit of the charity, which was founded by Sir Jim Ratcliffe, reporting that it helped to fund a £16m luxury clubhouse for an exclusive French Alps club (ostensibly to help underprivileged children to ski) and that the ski club advertises that members of the exclusive resort "can benefit from a tax deductibility". The charity has denied any wrongdoing, and we will have to wait for the outcome of the regulatory compliance case to know whether or not this is an example of maligning philanthropists that Mr Fraser talked about last year.
Some individuals have fought back against the cynicism. In 2021, Marcus Rashford defended his philanthropy work when faced with a rumour that the Spectator was due to publish a story about him benefitting personally from it. He questioned the assumption that he must be benefitting from his partnerships and tweeted "Why has there always got to be a motive? Why can't we just do the right thing?"
The future of philanthropy?
There is no doubt that there is much work to be done to encourage and increase philanthropic activity to support the charity sector, not least in breaking down preconceptions that philanthropists must be selfishly motivated.
So, what next?
The Charity Commission is actively seeking an experienced philanthropist to join its board to inform its strategy as regulator. Mr Fraser has also confirmed that although the Commission is limited in how it can help encourage philanthropy (the UK Government wielding the most power in that regard), the Commission is committed to supporting philanthropy within the sector by:
- Continuing to enforce charity law robustly and protect the integrity of charity, to give confidence to donors.
- Using its voice to emphasise the importance of philanthropy to the sector and wider society.
- Publishing new guidance on returning and refusing donations to promote and support lawful philanthropy.
- Promoting the adoption by charities of impact reporting to enhance accountability of charities to donors.
The Law Family Commission on Civil Society report sets out 26 recommendations around six core themes. Two of these revolve around themes of philanthropy and collaboration across the private, public and third sectors:
- Improving the scale, distribution and impact of funding for the sector.
The recommendations include that the UK Government should make more efforts to boost philanthropy "starting with the appointment of a Philanthropy Champion and a 'leveraging philanthropy' drive across Whitehall". There is also a call for the FCA to require financial advisors to receive training on philanthropy and impact investing.
- Bringing businesses and civil society together.
The report sets out four key recommendations "aimed at fostering greater collaboration between business and the charity sector". These include a recommendation that "charities, businesses, investors and advisors should work together to improve the measurement of businesses' social impacts and the value of civil society partnerships", and that the UK Government should "aim to reinstate the requirement for businesses to report their contributions to charities and civil society".
There are plans in place to take forward the various recommendations made by the Law Family Commission on Civil Society. If you are interested in this ongoing work, you might like to sign up to receive updates from Pro Bono Economics.
With encouragement and support from the UK Government, the Charity Commission and the ongoing work of those involved with the Law Family Commission on Civil Society (more prominently Pro Bono Economics, Andrew Law and the Law Family Charitable Foundation), we hope that there is a bright future on the horizon for philanthropists and the wider charity sector.
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