Gideon Salutin and James Kirkup work for the Social Market Foundation.
As inflation bites, almost everyone in the country has had to think about cutting back on some spending. Unfortunately, some understandable household economies could spell trouble for Britain’s charities, as people reduce their donations to good causes.
At the Social Market Foundation, we’ve been studying charitable giving and the way charities raise money, now and in future. After talking to the general public and charities themselves, we have a report out today offering some slightly gloomy findings about the cost of living crisis, but also optimism that better policies can help deliver a brighter future for charities.
Let’s start with the gloom. The current inflation squeeze on households’ real incomes looks like being a much bigger problem for the charity sector than the pandemic was.
It may be hard to recall now but, back at the start of the Covid years, many charities feared the worst, worrying that both fundraising and operations would be severely harmed. In fact, the resilience and adaptability of the voluntary sector meant that charities came through the pandemic in much better condition than many expected.
The generosity of British households was crucial to building and retaining that resilience. Since 2010, Government funding for charities is down by around 14 per cent. Such reductions are rarely without controversy, but the response to those cuts may vindicate those who believe that society can and should replace state activity and state spending: since 2010, increase in private donations has more than offset lost government funding.
That’s surely a good thing: who could object to a society where more people give more of their money to charitable causes? However, it does mean that charitable incomes can be more fragile, since household giving can be more sensitive to economic change than public spending.
That could well be the story of the inflationary spike for charities. Polling by Stack Data Systems for our report shows that 41 per cent of the public say they will be cutting their charitable donations this year. Twenty-one per cent of those polled in our survey said they do not expect to be able to donate at all over the next year.
A charitable sector that is increasingly reliant on individual giving therefore needs to have the best possible response to a future of falling donations.
The profile of donors underlines the importance of innovation and better policy. Individual donors are more likely to be over 55, and skew female. According to our survey, the median total amount donated over the past year was £50, with 18-24 year olds donating the least (£40) and over-75 year olds donating the most (£100.)
Helping younger people build the habit of charitable giving should be a priority, not least through innovative fundraising methods. Our research has been supported by Omaze, who run prize draws for big charities such as the British Heart Foundation, Alzheimer’s Research UK and the RSPCA. The survey shows that 30 per cent of the people who take part in those draws say they had rarely or never given money to charity before.
Perhaps predictably for a think tank dedicated to the idea of the social market, some of our recommended innovations around fundraising involve stronger partnerships with businesses, to embed support for charitable activity in their work.
The Co-Op Group offers a good example. It’s a profit-making company whose 4.4 million card-carrying members get a stake in the business and the chance to direct some Co-Op funding to charities in their area. Supporting local charities while doing your shopping is a perfect illustration of how business and society can come together to make a difference to communities.
Size matters here. In our conversations with charity leaders of various sorts, it was clear that bigger charities have been more able to innovate and take advantage of new funding opportunities. The challenge now is to help ensure that smaller charities can do the same, and make up some of the ground they’ve lost in recent years.
Over the last 20 years, income for charities has risen in real terms from £35 billion in £58 billion in 2020. However, those aggregate figures mask a polarisation between bigger and smaller organisations. Since 2007, charities with a turnover of over £1 million have seen their budgets grow by 28 per cent, increasing their combined incomes by around a billion pounds a year. But smaller charities – those with income under £100,000 – have lost 26 per cent of their budgets. Medium-sized charities, with revenues between £100,000-£1 million, have seen revenues fall by 17 per cent.
There are also signs that national gains can come at the expense of local causes. Although 68 per cent of people in our survey said would like their donations to go towards local causes, just 33 per cent donate to local charities. Moreover, those local donations are unevenly spread – unsurprisingly, charities operating in more affluent parts of the country find it easier to raise money. Our research found a clear north-south divide in charitable income. A better set of charity policies would mean we had big and vibrant national charities, but also a network of healthier small and local charities.
Our suggestions for supporting the charitable sector involve some give and take from government. The giving should come in the form of new grants available only for small charities. We propose a new fund providing competitive grants exclusively to micro and small charities, which often provide services in isolated communities. Jeremy Hunt’s £120 million fund for front-line charities announced in the Spring Budget is a good start, though it should now be made permanent, increased and targeted towards smaller organisations.
One policy we don’t support is a big expansion of Gift Aid, recently proposed by Gordon Brown. We worry that would favour big charities over small ones, and further encourage dependency on donations that can vary with the economic cycle. There is a role for public money here, but it should be deployed to counter recent trends in the charity sector, not amplify them.
What government should take away is regulation and red tape. Currently, a charity with just £25,000 annual income must submit similar returns to a charity with over £1 billion in revenue. While these regulations are a well-intended attempt to prevent malpractice, they harm small charities which lack the staff, time, and revenue to meet extreme regulatory hurdles.
So we think regulations should be set proportionate to charity income and public assistance should be made available for smaller charities to access accounting or legal help. The Government’s Help to Grow scheme supports the growth of small business; we’d like to see something similar for small charities.
Edmund Burke and his ideas are not quite as fashionable in British politics as they were a decade or so ago, but the outlook for the charity sector in Britain today almost demand that we conclude with him. Charities are surely Burke’s “little platoons” in action. With some new ideas and smarter policies, they can be deployed to even greater effect.
The SMF report Giving Back was published earlier today.
Gideon Salutin and James Kirkup work for the Social Market Foundation.
As inflation bites, almost everyone in the country has had to think about cutting back on some spending. Unfortunately, some understandable household economies could spell trouble for Britain’s charities, as people reduce their donations to good causes.
At the Social Market Foundation, we’ve been studying charitable giving and the way charities raise money, now and in future. After talking to the general public and charities themselves, we have a report out today offering some slightly gloomy findings about the cost of living crisis, but also optimism that better policies can help deliver a brighter future for charities.
Let’s start with the gloom. The current inflation squeeze on households’ real incomes looks like being a much bigger problem for the charity sector than the pandemic was.
It may be hard to recall now but, back at the start of the Covid years, many charities feared the worst, worrying that both fundraising and operations would be severely harmed. In fact, the resilience and adaptability of the voluntary sector meant that charities came through the pandemic in much better condition than many expected.
The generosity of British households was crucial to building and retaining that resilience. Since 2010, Government funding for charities is down by around 14 per cent. Such reductions are rarely without controversy, but the response to those cuts may vindicate those who believe that society can and should replace state activity and state spending: since 2010, increase in private donations has more than offset lost government funding.
That’s surely a good thing: who could object to a society where more people give more of their money to charitable causes? However, it does mean that charitable incomes can be more fragile, since household giving can be more sensitive to economic change than public spending.
That could well be the story of the inflationary spike for charities. Polling by Stack Data Systems for our report shows that 41 per cent of the public say they will be cutting their charitable donations this year. Twenty-one per cent of those polled in our survey said they do not expect to be able to donate at all over the next year.
A charitable sector that is increasingly reliant on individual giving therefore needs to have the best possible response to a future of falling donations.
The profile of donors underlines the importance of innovation and better policy. Individual donors are more likely to be over 55, and skew female. According to our survey, the median total amount donated over the past year was £50, with 18-24 year olds donating the least (£40) and over-75 year olds donating the most (£100.)
Helping younger people build the habit of charitable giving should be a priority, not least through innovative fundraising methods. Our research has been supported by Omaze, who run prize draws for big charities such as the British Heart Foundation, Alzheimer’s Research UK and the RSPCA. The survey shows that 30 per cent of the people who take part in those draws say they had rarely or never given money to charity before.
Perhaps predictably for a think tank dedicated to the idea of the social market, some of our recommended innovations around fundraising involve stronger partnerships with businesses, to embed support for charitable activity in their work.
The Co-Op Group offers a good example. It’s a profit-making company whose 4.4 million card-carrying members get a stake in the business and the chance to direct some Co-Op funding to charities in their area. Supporting local charities while doing your shopping is a perfect illustration of how business and society can come together to make a difference to communities.
Size matters here. In our conversations with charity leaders of various sorts, it was clear that bigger charities have been more able to innovate and take advantage of new funding opportunities. The challenge now is to help ensure that smaller charities can do the same, and make up some of the ground they’ve lost in recent years.
Over the last 20 years, income for charities has risen in real terms from £35 billion in £58 billion in 2020. However, those aggregate figures mask a polarisation between bigger and smaller organisations. Since 2007, charities with a turnover of over £1 million have seen their budgets grow by 28 per cent, increasing their combined incomes by around a billion pounds a year. But smaller charities – those with income under £100,000 – have lost 26 per cent of their budgets. Medium-sized charities, with revenues between £100,000-£1 million, have seen revenues fall by 17 per cent.
There are also signs that national gains can come at the expense of local causes. Although 68 per cent of people in our survey said would like their donations to go towards local causes, just 33 per cent donate to local charities. Moreover, those local donations are unevenly spread – unsurprisingly, charities operating in more affluent parts of the country find it easier to raise money. Our research found a clear north-south divide in charitable income. A better set of charity policies would mean we had big and vibrant national charities, but also a network of healthier small and local charities.
Our suggestions for supporting the charitable sector involve some give and take from government. The giving should come in the form of new grants available only for small charities. We propose a new fund providing competitive grants exclusively to micro and small charities, which often provide services in isolated communities. Jeremy Hunt’s £120 million fund for front-line charities announced in the Spring Budget is a good start, though it should now be made permanent, increased and targeted towards smaller organisations.
One policy we don’t support is a big expansion of Gift Aid, recently proposed by Gordon Brown. We worry that would favour big charities over small ones, and further encourage dependency on donations that can vary with the economic cycle. There is a role for public money here, but it should be deployed to counter recent trends in the charity sector, not amplify them.
What government should take away is regulation and red tape. Currently, a charity with just £25,000 annual income must submit similar returns to a charity with over £1 billion in revenue. While these regulations are a well-intended attempt to prevent malpractice, they harm small charities which lack the staff, time, and revenue to meet extreme regulatory hurdles.
So we think regulations should be set proportionate to charity income and public assistance should be made available for smaller charities to access accounting or legal help. The Government’s Help to Grow scheme supports the growth of small business; we’d like to see something similar for small charities.
Edmund Burke and his ideas are not quite as fashionable in British politics as they were a decade or so ago, but the outlook for the charity sector in Britain today almost demand that we conclude with him. Charities are surely Burke’s “little platoons” in action. With some new ideas and smarter policies, they can be deployed to even greater effect.
The SMF report Giving Back was published earlier today.