Can we get more people giving, AND increase total charitable giving at the same time?

by Stephen Tall on July 8, 2010

Third Sector reports the news that the Coalition Government has more or less ruled out changes to the Gift Aid scheme which some charity sector organisations had called for:

The government is unlikely to increase the rate of Gift Aid for charities, civil society minister Nick Hurd told delegates at the Institute of Fundraising’s National Convention yesterday.

Hurd’s comments will come as a blow to sector umbrella organisations, including the IoF, which have been lobbying the Treasury for a composite rate of Gift Aid. A composite rate would mean all donations would receive a higher rate of relief but donors who paid higher rates of income tax would no longer be able to claim any personal tax relief.

However, Hurd told delegates: “The prospect of more taxpayers’ money to prop up Gift Aid is, I think, unlikely.”

In fact the proposal for a composite rate of Gift Aid relief is more controversial than the report suggests, as there is much debate about the level at which it should be set, and even more about the extent to which it might hit any charity which has invested in building its major giving programme – as the abolition of higher-rate personal tax relief on charitable giving might well have prompted some major donors to think again about the scale of their philanthropy.

A composite rate of Gift Aid might well boost levels of public participation in giving – and that would certainly be a good thing. But not if the overall level of money received drops as a result of major donors curtailing their giving. As the 2009 UK Giving report points out:

In 2008/09, 2 million people (7% of donors) gave more than £100 per month, but these donors generated almost half (49%) of the total amount given to charity. The work of many charities is clearly reliant on these higher-level donors. Conversely, most donors gave much smaller amounts: 11.3 million people (42% of donors) gave under £10 in a typical month. Whilst this is a significant number of donors, these donations comprise only 5% of the total amount given.

What intrigued me more, though, was this concluding sentence in Third Sector’s report:

Hurd told the convention that he was donating one per cent of his income to charity, with beneficiaries selected by his children. He urged all who could afford it to do the same.

Two important points here:

1. One per cent of income is not actually very much.
As a government minister, Mr Hurd will earn just over £100,000 a year, including his MP’s salary. So his charitable giving (assuming he does it out of gross income) will be in the region of £1,000. Giving to charity is of course a personal choice: whether to do it at all, and if so how much. But I’d suggest a government minister wanting to boost the ‘Big Society’ could well afford to at least double his charitable contributions.

2. Poorer people are more generous than richer people.
Mr Hurd urges “all who can afford it” to copy his example. Yet survey after survey both in the UK and in the US (here and here) has shown that, as a proportion of their income, the poor who give to charity are much more generous than the rich, giving away up to 4.5% of their income – a percentage which puts Mr Hurd’s 1% in the shade.

The goal is clear enough: to get as many people giving what they can throughout their lifetime (and then leaving a legacy). The debate on how to get there rumbles on.