Current giving, philanthropy, and the shaping of Big Society

Cathy Pharoah, Co-Director, ESRC CGAP

Current giving, philanthropy, and the shaping of Big Society

www.shaw-trust.org.uk

Private action, public benefit?Current policy context - a new focus on the relationship between private individual decision-making/ preference and meeting public needs

Classical economic approach to private philanthropic action - individuals step in to provide public goods where governments fail

Recent governments – examples of measures to support private action for public benefit

a) modernisation/ extension of charitable tax reliefs (Lawson, 1988-1990)

b) ‘Private action, public benefit’ (Strategy Unit Consultation, 2002)

‘to modernise charity law and status to provide greater clarity and a stronger emphasis on the delivery of public benefit’

Flies in the ointment

- ‘impure altruism’ and crowding out theory (eg Andreoni, 1990)

- limited evidence of redistributive effects – US research, Clotfelter (1992) and Reich (2005):

UK; recent ‘charity deserts’ work (eg Mohan, CGAP)


Need for a nudge

‘Libertarian paternalism’ (Thaler and Sunstein, 2008)

‘……Free to choose…..but we argue for self-conscious efforts, by institutions in the private sector and also by government, to steer people’s choices in directions that will improve their lives

‘.…in many cases individuals make pretty bad decisions – decisions they would not have made if they had paid full attention and possessed complete information, unlimited cognitive abilities and complete self-control’.

Giving Green Paper (White Paper due 23rd May 2011) –

‘…….Big Society ambition……a country in which people are in more control, supported to pursue their collective and individual goals, and are less reliant upon the state’

‘……paper is about how we can increase levels of giving and mutual support in our society and catalyse a culture shift that makes social action a social norm.’

‘…….people giving what they have…to support good causes and help make life better for all’.

Is ‘supporting good causes’ enough? How far can/ will private philanthropy fill gaps in meeting social needs which emerge as government expenditure reduces?


Review of the current private giving and philanthropy* landscape - some key features

Recent trends in current philanthropy:

the organisations currently soliciting private support

the private giving cake

recipients of private giving

private donors

New needs, demands, and big society issues

*philanthropy is used to refer to the wider context of philanthropic action, within which private giving is one element


The philanthropy-seeking sector?Registered charity sector has doubled in a decade, £24 billion - £52 billion

Plus charitable quangos and major cultural institutions which do not report to Charity

Commission, but may be major fundraisers

Non-registered voluntary associations/ community groups

Social enterprise sector (eg CCI, IPS, Credit Unions)

Tax-exempt entities (universities, Brownies)

Housing associations

Independent Schools

Big Society?


Philanthropy cake (estimated)

0.51.11.72.02.49.5

£1 + Gift Aid Tax ReclaimTOTAL = 18.2…ish!

Sources: McKenzie and Pharoah, www.cgap.org.uk/uploads/TaxAndGiving.pdf; UK Giving 2010 (CAF/NCVO); HMRC Table 10.2, 2010; Legacy Foresight 2010; Sunday Times Rich List, 2011

Companies (cash)

HRT/ Mass Affluent

UNHW

Legacies

Foundations

General Public

Billions

http://www.cgap.org.uk/uploads/TaxAndGiving.pdf�


Benevolent

Elderly

Youth/ leisure

Educ'n/professional

Health Inf/ Research

Chest and Heart

Arts and culture

Children

Disability, deaf, blind, mental health

Religious (mission)

Hospices/ hospitals

Religious (International)

Animal welfare

Religious (welfare)

International

Cancer

Community devt/ regeneration

Service/ex-service

General soc welfare

Env't/ Conservation

What gets the biggest slice of our giving* cake?

*Includes individual, corporate, private trust and legacy giving

Source: Pharoah, Charity Market Monitor 2011, CaritasData (forthcoming July 2011)


Children/ youth/ leisure

InternationalDisability, deaf, blind,

mental health

Educ'n/ professional

Arts and culture

Community devt/ regeneration

Religious (welfare)

Service/ ex-service

Religious (Intern'l)

Health Inf & Research

Env't/ Conservation

Hospices/hospitals

General soc welfare

Chest and Heart

ElderlyBenevolent

Cancer

Which favourite causes get the biggest slice of the statutory cake*?

*Animal welfare and religious missionary causes have disappeared

Source: Pharoah, Charity Market Monitor 2011, CaritasData (forthcoming July 2011)


The donors - trendsLong-term study –

‘The New State of Donation – Three Decades of Household Giving to Charity 1978-2008’ (www.cgap.org.uk/uploads/reports/The new state of donation.pdf)

Participation in giving

ongoing 30-year decline from 32% to 27% in participation (halted c 2000?)

participation declined steadily in all age groups BUT the over 60s

(except very recently in 20-25s)

participation grew steadily amongst over 65s

positive link between age, income and participation growing stronger over time

Increase in donor giving and generosity, but no change in general population giving over 30 beyond parity with increase in general expenditure

http://www.cgap.org.uk/uploads/reports/The new state of donation.pdf�


Average donations by GB households

millennium effect Asian tsunami

total population

donor population


‘Generosity’Income and amount given

positive link between growing stronger over time

‘generosity’ increased among donors, though not population as a whole

poorer households continue to donate a higher % of income, but decreasingly likely to give

Age and amount given

share of total giving contributed by over-65s grew from 24% to 35%

the gap between older and younger households widened, and by 2008 older people were devoting 3% of their spending to charity, compared with 2% at the beginning.

this is largely due to their increased spending power (www.cgap.org.uk/uploads/BriefingPapers/CGAP BN7 How generous is the UK.pdf)


0.4% 0.4%0.3%

0.4%

millennium effect1.9%

1%

1.7%

0.2% of expenditure on potatoes and 0.4% on cheese in 2008



Donor preferences and differential influence on causes supported – some illustrationsDifferences between what wealthier and less wealthy donors support

eg Bigger gifts favour arts, smaller gifts favour animal welfare (Scharf and Smith) (2010)

Membership – a survey showed 10% of organisations receiving public funds regarded

membership as their most important source of income (TSRC, Working Paper 45)

‘Engaged’ philanthropy - active donor involvement

Differences in causes supported by different types of private philanthropy support eg:

legacy ‘counter-trend’

companies – by-passing charities?

cross-currents in health – research/ information (foundations and individuals)

drugs/ alcohol rehabilitation, aids, mental health (NHS)

care (NHS, individual donors)


Arts and culture examplecorporate investment of £144 million – over one quarter of all corporate cash giving

skew to the major national institutions, with well over half of all corporate sponsorship directed to London, and 83% to national organisations

11% drop in corporate support in 2010

but charitable trust giving to the arts is at £155 million - growing since 2004, now outstripping corporate support

(Source: Arts and Business Private Investment in the Arts 2010)

‘In the US support from private foundations has tended to gravitate towards larger, high-profile ‘fine arts’ institutions – the plurality of the US model is not resulting in a diverse arts community’ (Diane Ragsdale, RSA Journal Spring 2011)

generally increasing competition for trust funds eg both BLF and Lloyds TSB Foundation have recently reported escalating numbers of applications.


Venture philanthropy/ social investment?

Statutory funding cuts - £3 – 4 billion? (over 4 years)

Sub-sector diversity - cuts will be highly unevenly experienced

Special/ social investment funds - £1 billion (10-year growth,1-2% of sector)

Programme Related Investment - £3 million per annum?

BSB - £400m?

Current sector borrowing (largely mainstream banks) - £ 3 billion (ish)

New markets, opportunity


Social investment, social financeChallenges to existing non-profit sector boundaries:

private giving and investment

voluntary and trading income

charitable objectives

accounting requirements

tax requirements

legal requirements

legal forms

Assessment of capacity - speed, direction, scale of change?


Philanthropy – some trends, issues

Philanthropy part of a pluralist society, but not inherently diverse or pluralist?

History/ path dependence

Increasing dependence on narrower base of donors

Increasing competition for resources

Long-term trends?

Philanthropic resources – new? redirection of existing?

Giving or investing – tensions in culture/ motivation

The new donor – fact or fiction?

New technologies/ methods – substitution or new markets?

Future philanthropy - funding gaps, shifting sector direction or driving reconfiguration?

Current giving, philanthropy, and the shaping of Big Society

Health & Medicine

private philanthropy

current giving

private trust

b private action

current philanthropy

social action

registered charity sector

charity law