Large donations to charities fall a lot

11 November 2009

I believe the UK would benefit from more charitable giving by the wealthy. To this end, I think we need more debate about, more discussion of, and more research into charitable giving.

The University of Kent’s ‘The Coutts Million Pound Donors Report 2009’, published earlier this week, is therefore a welcome addition to the literature and to our knowledge. Unfortunately, the presentation of this worthwhile effort leaves something to be desired. In short, it underplays the decline in the value of large gifts by wealthy donors. This undermines the sensible and useful analysis in the report.

The report shows a 13% decline in the value of donations of £1 million or more during 2007-08 compared with 2006-07. The report says this indicates philanthropy has been ‘remarkably robust’ so far during the recession. Such a line has been repeated in press coverage by the (London) Times, the Financial Times, Charity Times and Chronicle of Philanthropy.

Author of the report, academic Beth Breeze is quoted as saying this shows ‘UK philanthropy is far more resilient than many people have suggested’. Who? I am not aware of credible, quantitative estimates of the impact of the financial crisis and recession on charitable giving suggesting a big fall. The most credible analysis, led by the National Council for Voluntary Organisations, said giving might not decline at all. While a reasonable prediction based on the evidence, this proved sadly way off the mark as the most recent survey of giving indicates an 11% fall in the value of donations by the public during 2008/09.

That 11% fall in overall giving is similar to the 13% decline in donations of £1 million or more. But that is not comparing like with like as the periods covered by the two studies differ. Figures for total donations for the two overlapping periods of 2006-07 and 2007-08 can be compiled from publications ‘UK Giving 2009’ and ‘UK Giving 2008’ from NCVO and Charities Aid Foundation. These periods are almost exactly comparable to those covered by the Million Pound Donors report. They show a fall of 2.0% in total giving in real terms for 2007-08 versus 2006-07.

A fall of 2% is far better than a 13% decline in very large donations (and adjusting for inflation would make the difference even greater). This reinforces the impression that there is nothing ‘remarkably robust’ about the value of donations over £1 million compared with the total of all charitable giving. Rich people making large donations seem to be cutting back more than the population as a whole.

During this period, wealthy donors saw a considerable fall in their wealth. One might have expected donations to fall in line with wealth. But that ignores the way people smooth their consumption. Economist have long argued—and evidence has long agreed—that people smooth spending in line with some notion of ‘permanent income’. No sensible analysis of charitable giving would have predicted a decline in large value donations in line with the fall in wealth.

The plain truth is that large value gifts have fallen more than donations by the mass public. This is not better than expected, it is simply disappointing.

We need to celebrate giving, encouraging rich people to give more and to be increasingly open about this. As part of this we need sensible debate, which requires good quality data. It also requires objective analysis. There can be a tendency to talk up rich giving, and this does the quality of debate no good at all.

Beth Breeze is a real asset to such debate in the UK. And Coutts deserves a pat on the back for their continued efforts in this field. I hope the Million Pound Donors Report continues for many years to come; it already is proving a valuable data resource. I also hope that next time the presentation of the data is better.

(Note that the time periods covered by the CAF/NCVO surveys of giving run from April to March each year, whereas the Million Pound Donors data runs from January to December over a two year period. Given the depth of the recession in the first quarter of this year, when giving might be expected to be particularly low, that should reinforce the point made here about the relative changes in the value of donations.)