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LEVELLING UP, SOCIAL FABRIC

Giving Back Better

Unlocking philanthropy in the UK
Shivani H Menon
January 24, 2024
Giving Back Better

“There are countless reasons for optimism. Despite the pressure on household budgets, we are still one of the most generous countries in the world for giving money. Our long history of philanthropy is grounded in the selfless instincts of the vast majority of the people in this country. But we can, and must, go further. Reports like this one help to illuminate the opportunity we have to supercharge philanthropic giving.”

Philanthropy is a vital source of economic and social capital. It brings with it wealth in many forms – in funding, expertise, networks, and innovative thinking to solve pressing problems. In the current climate where an alarming number of charities are on the verge of bankruptcy, philanthropy matters more than ever before.

But three trends are holding back philanthropy’s potential:

The most affluent are donating proportionately less. The top 10% of earners in the UK donate at half the rate of the poorest 10%, resulting in £3.4 billion of lost funding for charities.

Too few wealthy individuals are participating in philanthropy. Of all donations from the top 1% of households, half came from less than 5% of the group. 

And donors are donating to a narrow set of places in the UK. Donations made through Gift Aid were four times higher in London compared to the UK average. And over a third of all grants from the largest philanthropic foundations were made into London.

Understanding the giving gap: weak incentives and underpowered institutions

Gift Aid is complex and underused. Nearly a third of all donors find the system too complicated to use. As a result, charities lose out on up to £564 million of donations each year through unclaimed Gift Aid. And almost two-thirds of HNW donors do not claim their Gift Aid reliefs. 

Social and cultural incentives to give are weak. While many engage in charitable giving, few individuals talk about their giving, and cultural factors mean that conversations about wealth happen largely in private. Philanthropists are also frequently negatively perceived in the media.

Advice on philanthropy is hard to find. Only one in five professional advice firms offer any kind of advice on philanthropy. And even when firms consult on philanthropy, they are unlikely to provide the full 23 services needed to provide comprehensive support. 

Philanthropy is poorly coordinated within Government. Split between multiple departments, state responsibility for philanthropy is fragmented.  The cross-cutting nature of philanthropy often means that strategic oversight is needed to ensure that philanthropic activity is as impactful as possible.

Local institutions have limited capacity. Underpinning this uneven distribution of philanthropic funding are the agents of delivery of philanthropy that are either lacking or poorly coordinated in the places that receive less.

Recommendations

This report sets out a series of practical steps to usher in a wave of philanthropic renewal.

First, to increase the flow of funding into charities:

1.1 HMRC should automate Gift Aid to make it simpler and easier to use

1.2 The Financial Conduct Authority should make philanthropy a mandatory part of training for wealth advisors.

1.3 The Government should launch a National Philanthropy Strategy, led by a newly appointed Philanthropy Champion.

Second, to ensure that funding reaches the places that stand to benefit most:

2.1 The Government should launch ‘Charitable Action Zones’ in places that experience a deficit of charitable activity.

2.2 Local leaders should create diaspora philanthropy funds to attract donations from successful “sons and daughters” of UK towns and cities.

Understanding the giving gap: weak incentives and underpowered institutions

Gift Aid is complex and underused. Nearly a third of all donors find the system too complicated to use. As a result, charities lose out on up to £564 million of donations each year through unclaimed Gift Aid. And almost two-thirds of HNW donors do not claim their Gift Aid reliefs. 

Social and cultural incentives to give are weak. While many engage in charitable giving, few individuals talk about their giving, and cultural factors mean that conversations about wealth happen largely in private. Philanthropists are also frequently negatively perceived in the media.

Advice on philanthropy is hard to find. Only one in five professional advice firms offer any kind of advice on philanthropy. And even when firms consult on philanthropy, they are unlikely to provide the full 23 services needed to provide comprehensive support. 

Philanthropy is poorly coordinated within Government. Split between multiple departments, state responsibility for philanthropy is fragmented.  The cross-cutting nature of philanthropy often means that strategic oversight is needed to ensure that philanthropic activity is as impactful as possible.

Local institutions have limited capacity. Underpinning this uneven distribution of philanthropic funding are the agents of delivery of philanthropy that are either lacking or poorly coordinated in the places that receive less.

Recommendations

This report sets out a series of practical steps to usher in a wave of philanthropic renewal.

First, to increase the flow of funding into charities:

1.1 HMRC should automate Gift Aid to make it simpler and easier to use

1.2 The Financial Conduct Authority should make philanthropy a mandatory part of training for wealth advisors.

1.3 The Government should launch a National Philanthropy Strategy, led by a newly appointed Philanthropy Champion.

Second, to ensure that funding reaches the places that stand to benefit most:

2.1 The Government should launch ‘Charitable Action Zones’ in places that experience a deficit of charitable activity.

2.2 Local leaders should create diaspora philanthropy funds to attract donations from successful “sons and daughters” of UK towns and cities.

In a foreword, Culture Secretary Rt Hon Lucy Frazer commented: 

“There are countless reasons for optimism. Despite the pressure on household budgets, we are still one of the most generous countries in the world for giving money. Our long history of philanthropy is grounded in the selfless instincts of the vast majority of the people in this country. But we can, and must, go further. Reports like this one help to illuminate the opportunity we have to supercharge philanthropic giving.”

“As Secretary of State, I want to create an environment that encourages and incentivises businesses, individuals, networks coming together to give back. To do that, we will work across society to open up a new age of philanthropy in this country.”

Shivani H Menon, Senior Researcher at Onward, commented:

“Philanthropy is a powerful way for the richest to give back, funding causes and initiatives that the government and markets too often miss. It’s something we must encourage, not shy away from.

“But the most affluent Brits aren’t holding up their end of the charitable bargain that expects those with the most to give generously to the least. Their donations dwarf in comparison to their growing incomes and wealth, and only a handful of the richest do the lion’s share of donating while too many others sit idle. 

“We need to unleash Britain’s untapped philanthropy potential with better tax incentives, reformed wealth advice and stronger regional giving to encourage a new generation of givers.” 

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