What does the Budget mean for philanthropy?

By Clare Yeowart 23 June 2010

Yesterday’s Budget was never going to make for a cheery read. What the Chancellor, George Osborne, has been calling the ‘unavoidable Budget’ confirmed what we’ve all known for a while now—that the cuts are going to be deep and painful.

There’s already been lots of commentary in the press and blogosphere unpicking what it means for charities. Much of the discussion has focused on the rise in VAT, the average 25% cuts to departmental budgets, and the £11bn reduction in the welfare budget. Charity Tax Group has estimated that charities’ total VAT bill will increase by £143m. Others have expressed concerns about the impact of measures like freezing child benefits and introducing a new medical assessment for the disability living allowance. (Those wanting more info should take a look at ACEVO’s new Cuts Watch website and the NCVO’s Budget & Beyond.)

I don’t think there’s much point me recapping what others have said. The bottom line is that charities are going to have their work cut out. And, with the best Big Society will in the world, they’re likely to struggle to fill all the needs left by the retreat of public services, particularly when their own funding is under threat.

Which is where philanthropists come in. So what does the Budget mean for them?

Basically, there’s still a lot that needs to be nailed down. The Budget is pretty vague on Gift Aid. It says the Government will ‘continue to explore with voluntary sector representatives ways to improve the Gift Aid system and encourage charitable giving’.  And over the summer it will be consulting informally on replacing the current rules for substantial charity donors.

It’s obviously good the Government recognises it needs to take action on incentivising more philanthropy. But we also believe that it needs to encourage more effective philanthropy—after all, has it ever been more important that every penny goes as far as possible? The proposed consultations could offer it an opportunity to address this issue.

In our manifesto for social impact we put forward some ideas for how it could do this. One suggestion is that the Government uses its influence with UK banks to stimulate the development of new products and services that enable effective giving. For example, it could encourage banks and wealth managers to introduce donor-advised funds similar to those run by Fidelity and some other leading financial services providers in the US. These funds offer donors a flexible and accessible way of giving, removing the burden of grant management from the donor and providing tax incentives. They can also offer donors expert advice on issues such as choosing charities to fund and measuring the impact of donations.

You can read more of our manifesto proposals here. And we’d love to hear your ideas about other ways of encouraging more effective philanthropy post Budget.