In this economic crisis, we will do what we can to assist philanthropy
Speaking at the Beacon Philanthropy Forum, Orlando Fraser calls on the well-off to dig deeper in support of charity during these difficult economic times.
Good afternoon
Thank you to the Beacon Collaborative for having me.
What you Beacon, and all of you here in this room, are engaged upon is an incredibly important exercise, namely to stimulate further philanthropic giving at a time of a massive economic squeeze. Your task could hardly be more valuable for society as a whole.
And, as part of my duties as the new Chair of the Charity Commission for England and Wales, I wanted to be here this afternoon to signal my intention that the Commission will do all it reasonable can during this awful economic period, and indeed over the period of my Chairmanship, to help stimulate more philanthropic giving in England and Wales.
I will explain in due course how that intention to promote philanthropy fits into our statutory functions and duties, and also how I see that the Commission can help. But first I wanted to spell out why the Commission sees increasing philanthropy as so significant, especially now.
You don’t need me to tell you that these are incredibly difficult times.
The OBR estimates that real household disposable income will fall by over 4% next year, which would be the biggest fall in living standards since the mid-1950s.
Many who have so far been managing to make ends meet, now face poverty, and privations among those already living on the edge are becoming starker.
Earlier this month, the Trussell Trust reported that it provided almost 1.3m emergency food parcels between April and September this year. That is a 50% increase on pre-pandemic levels of demand on its services, and a third higher than the demand the charity faced only last year.
Charities, like the Trussell Trust will be a crucial part of the collective response to this crisis
But many charities in turn are struggling, affected by rising costs, rising demand, and the risk of dwindling income as ordinary donors tighten their belts. And inflationary pressures mean that donations are worth less and less.
It is too early for the impact of the current crisis to filter through to stark sector-wide statistics, such as large numbers of charities winding up and coming off the register.
But the anecdotal evidence of its impact is all around us.
I’ve visited charities the length and breadth of England and Wales since becoming chair.
Donations are down in many of the charities I’ve visited. All are feeling the impact of surging energy prices. Some have told me that this is affecting their operations already, for example limiting their opening hours.
I visited a Food Club in Manchester recently. The increase in demand on its work is staggering. Since the start of the pandemic, visits to their three Food Clubs have risen from 250 a week to over 2,000 a week.
Large national charities are not immune from serious challenges. Citizens Advice’ most recently published accounts show demand on its services sky-rocketed. The charity says it handled a million more calls in 2021-22 than the year before, and that cases are becoming more complex and urgent.
The charity’s CEO says its staff sometimes feel “like they are running out of tools” to help people in need.
Many charities, and their vulnerable beneficiaries, face an existential crisis in the months ahead.
Government of course has the primary role in helping the most disadvantaged through this crisis. But we have already seen that there are limits to how much funding the government can raise to help, whether from hard-pressed taxpayers, or sceptical markets.
So many charities and their beneficiaries will be relying on increased philanthropic giving simply to survive.
The Bank of England forecasts that inflation might start normalising within 18 months, and the OBR suggests we may begin to see growth returning to pre-pandemic levels in 2024. So there is a window, over the months ahead, during which philanthropists will have a major role to play in reducing the damage caused during this period to the sector.
It is literally all hands to the financial pump for now.
But philanthropic giving can of course do much more than simply keep a charity going in a time of crisis.
In this respect, philanthropy is a different kind of engine to public funding, one that drives public good in a distinct way.
It can do things governments cannot, and it can enhance what governments do provide. Philanthropy’s potential is distinct from that of the state, and is more than a way of plugging funding gaps for charities’ existing programmes.
High-net worth-individuals have huge potential to enable charities to grow and develop beyond their current capability. To help our sector improve to better meet the needs of beneficiaries in the UK and around the world.
For example, by enabling and encouraging innovation and risk-taking.
Charities are often reluctant to use public donations on untested methods or ideas.
Especially during tough economic times, trustees rightly focus on demonstrating sound financial stewardship, they want to steer a steady ship. Indeed, I’ve called on trustees to do just this, and show how they are meeting their duty of prudence at a time when households are counting the pennies too.
But it is precisely during times of social and economic crisis that we need fresh thinking. The sector’s response to the pandemic reminded us that, when faced with adversity, charities rise to the challenge. Both in responding to increasing demand for their services, and adapting those services to radically changed circumstances.
In the current climate, as the cost-of-living crunch hits home, philanthropists can facilitate rapid development and progress. Enabling charities to test new ideas, to try, fail, and eventually succeed in finding solutions to new and entrenched challenges.
Many philanthropists know that failures can cost, but that each failure can also inspire innovation and improvement..
Similarly, philanthropy can help charities develop new ways of measuring and demonstrating their impact.
Impact measurement in the sector, which can be highly personal to the charity, has long been driven by philanthropists, and philanthropic institutions such as New Philanthropy Capital. And I am happy to report that almost every trustee or charity leader I’ve met during my first 6 months as Chair of the Commission has raised it with me as an essential responsibility of theirs.
We know evidence matters not just to high-net-worth givers. It matters to us all. Earlier this year, we undertook research examining what information people need about charities in order to give them the confidence to give, and how/ when they access that information.
We are publishing the findings of that research later this week.
It reinforces what we already know from earlier studies into drivers of public trust: that people want to know where their money is going, what it is doing, how it drives change. People indeed feel a sense of ownership of their donation, right up until the point of it being transformed into change in the lives of beneficiaries. Charities are often seen by donors as the conduit of their generosity, not the recipient.
My sense is that this expectation will only become more pronounced in the months ahead, as donors will scrutinise more closely precisely what positive difference their money is making.
Yet sadly, despite this desperate need for greater philanthropy, credible evidence strongly suggests that not all of the top 1% are rising to the challenge in the way those in this room today are.
Indeed, there is evidence that, over recent years, the rich have become proportionally less generous.
Recent work from Pro Bono Economics, published last December, suggests that incomes among the top 1% of earners in the UK grew significantly between 2011 and 2019, around 10% in real terms. Yet over the same period, the typical donation to charity made by top earners fell by over 20% to just £48 a month.
And our hosts today, the Beacon Collaborative tell me that while the top 1% give around £2-3bn a year, that generosity is concentrated to a small proportion of the richest. It is considered that the £2-3bn figure come largely from only 20% of individuals in that top 1% - so 80% of the top 1% are not contributing meaningfully to that figure.
And our rich arguably seem to lag behind internationally in their generosity – giving less proportionally than their equivalents in similar countries around the world, such as Canada and New Zealand. Compared to those two nations, with which we have so much in common, the UK has a philanthropic deficit of £5 billion per year.
Compare the richest in our society to their counterparts in the USA, and that deficit rises to nearly £19 billion.
This is disappointing enough, but it verges on shameful when you consider how vibrant giving and volunteering are amongst the less fortunate of their fellow UK citizens.
Thus, as you may know, there are 170,000 charities on our register – and many more thousands so small they are not required to register. This is testament to the scale and vigour of charitable activity in our communities and across society.
It also tells a story of individual generosity and commitment. Charities are run by trustees, of which there are around a million, including those involved in the tiniest unregistered charities. The overwhelming majority undertake this important role entirely unpaid. Often on top of busy careers, and other commitments to family and duty.
Without that dedication, by so many people, we would have no charitable sector. Certainly, none so diverse, and so embedded in the fabric of our communities.
British people are also generous in their financial support of charity. Research from the Charities Aid Foundation suggests that last year, across the UK, people gave around £10.7 billion to charitable causes. A third of us gave in response to the crisis in Ukraine alone, with March 2022 seeing the largest average monthly donation ever recorded [£85].
On the whole, we have a vibrant culture of service and generosity.
The sad fact however is that some of those in our country with the deepest pockets are not covering themselves with glory in philanthropic terms – and this matters.
As Beacon themselves eloquently argue, the social contract in our nations has long been that those who have been very successful put back more into society to reflect their success, and indeed their luck, where so many others have had no such success or luck.
In the present dire economic circumstances, this social contract is more important than ever.
There are of course numerous visionaries from institutions in the charity sector studying exactly how to improve philanthropy night and day – many of whom are here today.
I could mention Beacon itself, or PBE, or NPC, or many others.
Their work merits serious attention from Government itself.
But perhaps the most effective tool is that which Beacon itself promotes, which is to improve the tone of public discourse around philanthropy, and celebrate it more.
In this respect, whilst there is always a place for shaming the rich into giving more (and I have deployed it myself this afternoon), we also need as a society to salute the greatest givers and thereby encourage others to join their ranks.
I do believe that, over recent years, there has been an unhelpful tendency to malign philanthropy and philanthropists. We have a culture in which people are scrutinised because they are giving, and giving publicly. We have seen scrutiny that supposes giving must be motivated by cynicism, by an attempt to ‘whitewash’ a bad reputation, or to obscure nefarious deeds, or to increase an individual’s power.
This feels misguided.
Those with means hold more power than those without. Donating a proportion of that wealth to charitable causes is an exercise of that power, certainly. But it is one that serves to empower others, too. Giving is good for those who give, it is good for those who benefit, and it is good for society as a whole.
I believe in the power and potential of stories.
I believe that we if can together encourage a handful of philanthropists to give, and give conspicuously, we will inspire many more.
A single story, a single act of generosity, or commitment or courage can change minds and attitudes among hundreds.
I understand the squeamishness some feel when they see rich people engaging in conspicuous philanthropy – it can make us feel uncomfortable, because it reminds us of the deep disparities of wealth and power around us.
But, to my mind, we need to overcome that attitude, and recognise that charities, and those who are vulnerable in our society, directly suffer if we inadvertently discourage such giving.
So let’s celebrate those who give, and those who facilitate giving.
In this respect, there are many examples around us of good givers who should be commended.
Earlier this month, philanthropists Julia and Hans Rausing launched a £10m grants programme to help charities and foodbanks to help tackle food poverty. A great move, at the right time.
Similarly, the Sainsbury family are prolific philanthropists, including through the Sainsbury Foundations, which have led the way in promoting environmental giving.
I would also like to mention Andrew Law and his family, who have shown great generosity. The Law Family Charitable Foundation last year made a nearly £6m donation to the University of Sheffield. Andrew Law has also spoken publicly in encouraging fellow hedge fund managers to give more.
So yes, when faced with an economic crisis such as the present, I do think that we must work together to create a culture in which the wealthy are encouraged to give, and indeed celebrated for giving.
Which brings me finally to my thinking on what the Commission itself can do to help this process of increasing philanthropy in the UK.
It is certainly within our remit to help, as we have both a duty to act compatibly with the encouragement of giving, and a function of facilitating the better administration of charities, which must inter alia include facilitating their philanthropic funding.
We are obviously limited in how we can help, as our role gives us no influence over fiscal incentives to giving, nor do we pull any other government levers that might nudge the rich to give more. But there are some important areas I can immediately see where we can and will help.
First, and always foremost, we shall continue to enforce charity law robustly where appropriate, as it is only in that way that many donors can have confidence to give widely to the sector.
We have robust registration processes to protect the integrity of charity, and we intervene in registered charities where there is abuse of charities.
We also are vigilant to ensure that the charitable sector is not infected by illegal funds, as they undermine charity. Although the UK’s National Risk Assessment tells us that the risk of such abuse is low, we use our enforcement powers actively to prevent this, as we repeatedly have in relation to those subject to sanctions following Russia’s invasion of Ukraine.
Second, we have our public pulpit, which I am using today, to signal the importance of the promotion of philanthropy in society to help fight this economic crisis.
Third, as part of our duty to provide legal guidance on charity law, I can confirm that next year we will publish updated guidance on returning and refusing donations. Its direction of travel will be a promotion of lawful philanthropy, and ought to further empower trustees to use their discretion in making the right decision for their charity, starting from the principle that charities must have funds in order to deliver on their purposes.
Charity trustees should of course think carefully about the donations they receive, especially large ones. Plainly they cannot accept any donation where it would be illegal for them to do so (including under sanctions rules), and they must be led always by their charity’s purposes. They must always be mindful of their reputations. So even if not illegal, if a donation would seriously put at risk the charity’s reputation, or other sources of finding or support, trustees may justifiably decide to decline.
But the starting principle must be that charities need funds to do their good work.
Commentators are, of course, free to express misgivings about the personal background of those who give, and the mores of trustees who accept their money. But those misgivings do not automatically translate into a regulatory concern on the Commission’s part, unless unlawfulness or serious risk is involved.
I should add in this context that I said when I became Chair that I would defend charities where I thought they were coming under unfair or undue attack, whether from the media, or politicians or any other quarter.
I can assure you that, given its obvious importance to the disadvantaged in society, I will very much do this in the context of philanthropic giving, where otherwise lawful and reasonable.
Fourth, we will continue to promote the adoption by charities of impact reporting, as part of our objective of enhancing the accountability of charities to donors. Charities should consider how to better formulate and communicate impact measurements in a way that fosters trust. I’d encourage charities to speak in the language of ‘bang for buck’ in the interests of further nurturing relationships with those with deeper pockets.
Fifth, and finally for now, we have persuaded the DCMS that we need an experienced philanthropist on our Board. I was pleased to be able to include this in current Board recruitment process, which closed recently - and I am sure there will be some excellent candidates.
In conclusion, and as I have said already, the charity sector, and its many beneficiaries, are currently facing one of the greatest economic crises in living memory, and it is beholden to those with the deepest pockets, those many existing and potential philanthropists, to put your shoulder to the wheel, and help out now before too much pain and damage is inflicted.
Now, of all times, you need to supply the tools which will help our charities do their jobs.
Please don’t disappoint, but instead come forward, be that example, and build a lasting, positive legacy for you and your family and help launch a new age of philanthropy in this country.
The Commission will do all it lawfully can to support you.