Ten trends in philanthropy

This article from the US onPhilanthropy newsletter lists ten trends in philanthropy in the UK:

  1. The return of philanthropy
  2. Growth in the UK economy
  3. Accumulation of private wealth
  4. Growth of private philanthropy: mega gifts
  5. Rise of the 'committed giver'
  6. Emergence of philanthropy 'think tanks'
  7. Professionalism of the fundraising sector
  8. Emergence of capital campaigns
  9. Tax incentives to encourage private philanthropy
  10. Government incentives to leverage private philanthropy

Some of the implications of these trends are explored in our driver on 'new philanthropists'. Amidst a decline in grants as a share of the sector's income, and increasing competition for funds, some have hailed 'new philanthropists' as a solution to the sector's funding problems. Although they can undoubtedly bring benefits to the organisations they fund, philanthropy of this kind does bring its own challenges, not least new concerns over independence and accountability.  It's an issue that deserves further exploration I think.

Last updated at 15:08 Mon 18/May/09.
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In light of the current credit crisis I felt awkward reading the recent post on the 10 trends on philanthropy on the Foresight Bulletin. It felt out of date. Is there any up to the minute conversation happening about the projected implications of the credit crisis on the sector and on future funding? I can’t seem to find anything anywhere. Any help would be appreciated.

Karl's picture

Karl

Third Sector Foresight

Sydney
I’ve blogged already on what I think the impact of the credit crunch is, so you might want to read that. But in response to your comments, I thought I would try and have a think! Perhaps the first thing is to be clear what we mean by the credit crunch – my lay understanding is basically an end to cheap money and liquidity. We could blog all day about the causes of the crunch, but lets accept its been here for about 4 months and shows no signs of going away, whatever the Central Banks decide to do in terms of loosening monetary policy.
The second point I would make is that I am a tad skeptical about the overall message in the article – there is a lot of media interest in the new philanthropy, but apart from a small number of names that are widely circulated is there substantive evidence that these resource inputs are making a big impact on either charitable giving or the voluntary sector economy (where government funding continues to be the main driver of change). So, here goes.
1. The return of philanthropy
A bit like the return of Superman to the big screen last year, this is not quite hitting the heights of latter days. I don’t see any big social challenges being addressed by UK philanthropists to match the abolition of slavery for example. So the potential impact of the credit crunch here might be to choke off a nascent return: you might presume that the resources required to enter big-stakes giving are made from stock-market flotation or exit and city bonuses. The crunch will mean less corporate merger/takeover etc, all of which limits the potential for both corporate and individual gain. An uncertain economy might mean individuals wanting to hold onto their money in case.
2. Growth in the UK economy
Well, every silver lining has a cloud, and the current cumulonimbus of choice is a fall in the value of commercial and residential property. The optimists have pointed to the excess of supply over demand, but Larry Eliott of the Guardian recently pointed out that this is not justified (private sector rents have not risen). The credit crunch is directly relevant here and has been widely written about: in short, lots of fixed rate mortgages coming to the end of their terms will put house owners and buy-to-let magnates on the variable rate, which is now higher. Banks will also tighten their lending criteria – so no more self-certification, interest only, 110% mortgages, etc. In the UK there is a real psychological connection between house prices and self-perception of wealth. If the housing market tanks I will be really worried about charitable giving – though you might argue that is not the same as philanthropy.
3. Accumulation of private wealth
The tax system has certainly created a cohort of super-rich who might be prime targets for fundraisers. The original article highlights their international footloose nature: so if the credit crunch hits the UK more badly than other countries, then maybe the non-doms will identify new pastures.
4. Growth of private philanthropy: mega gifts
I’m slightly more cautious about these stats as they are donor lifetime amounts. I wonder if they are based on current value of the donor – so if you follow arguments made already, these might get scaled back if the donor fails to liquidate assets. This is where the Northern Rock problem might fit: a post-mutual PLC makes a welcome philanthropic donation comprising capital and revenue elements, which makes regular, much needed injections into the voluntary sector economy. But the credit crunch has wiped out much of the capital value, meaning the mega gift is now worth much less.
5. Rise of the ‘committed giver’
Again, some of these statistics need careful interpretation. I agree the sector is more reliant upon committed givers than in the past, but it will be interesting to see just how much this cohort grows. If the typical committed giver is on a salary of £50k/year, I might even venture to suggest that these are the middle classes that have benefited from the housing boom who have most to worry about from a crunch.
6. Emergence of philanthropy ‘think tanks’
7. Professionalism of the fundraising sector
8. Emergence of capital campaigns

Not sure there are issues for these points. Capital campaigns have been around for a long time; they are not really new.
9. Tax incentives to encourage private philanthropy
Yes, there are tax incentives to encourage giving, and the Labour government has moved this agenda on significantly with the abolition of lower limits on gift aid. But my sense is that fiscal policy is moving towards lower, flatter taxation: which might remove the sort of wrinkles in the tax code that give people and incentive to donate. The repeal of the estate tax in the US is indicative of where next for the UK. Not sure about impact of the credit crunch here: will more tax losses mean less incentive to use charitable giving to avoid payment of tax?
10. Government incentives to leverage private philanthropy
Without doubt important. But I wonder if the single best thing the government can do to encourage giving relates to broader fiscal (and monetary) policy: create the conditions for wealth accumulation and stand back. In which case the credit crunch is obviously bad news.

I think all of your points are really valid. I think it’s important to expand the topic to more than just philanthropy but wider funding. I will read your blog to find out more before replying any further! thanks for this though.

Karl's picture

Karl

Third Sector Foresight

If it’s about wider funding, then the obvious things that spring to my mind (and I’ve mentioned a couple on the other credit crunch blog) are:

1. Loan finance: obvious really, but loan finance will dry up as institutions holding cash hoard it. Not a great time to be promoting market solutions and quasi-equity.
2. Foundations: likely to be hit by nervous equity markets. I’d be interested to know if anyone in the network knows whether foundations have been investing hedge funds, who from what I gather might be particularly exposed to the sorts of securities that are now perceived as risky.
3. Corporate-related foundations: we’ve seen a couple of examples now in the UK of foundations related to private sector bodies where funding arrangements have been changed as the parent has got into difficulty.
4. The sector becomes a more attractive employer to the professional classes: there may be real opportunities for the sector in terms of attracting career changers. I wonder if at times of financial distress people reassess what they want from a job and look to the sector? Again, anyone in the network remember this from last time around?

I’ll try and think of some more, but the most interesting question for me is at the macro, not the organisational scale: will the sector downturn in sync with the rest of the economy? Or is there something about our sector that is counter-cyclical given its focus on social and economic welfare?

The argument for the former might go something like yes, because the sector has become so intertwined with the other sectors and because of the social enterprise approach. The idea of a counter-cyclical sector might be based upon the idea that trustees make deliberate decisions to apply reserves when they are needed most – a sort of Keynesian boost. Sadly, I think reality is the former, but again I would be interested to hear the opinions of people who have been around a bit!

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