Reading tea leaves #20: 2010 the year of optimism?

Just as December is traditionally a month for looking back and reviewing the year about to end, January is a good time to dig out crystal balls and predict what the coming twelve months might have in store. So this column has asked some of the UK philanthropy sector’s most insightful commentators to share their predictions.

Richard Harrison, director of research at Charities Aid Foundation (CAF) is feeling optimistic because in December 2009 CAF had its second best month of the year for new Charity Accounts openings, which bodes well for a recovery in 2010. “Committed donors such as CAF account holders are continuing to give despite the economic turmoil and I think that will continue this year”. Richard also believes the higher rate tax change due this April should bring more good news for philanthropy: “We are already seeing some trust clients holding off putting funds into their charitable trusts because they want to take advantage of the new 50% tax rate that will apply in the new financial year; so after April we may see a rise in giving from some major donors.” A further good sign, according to Richard, is recent CAF research which shows that many people (44%) think a post-recession society will have a greater appreciation of the role that charities play, which could make 2010 a particularly good time to ask for donations.

Helen Cable, project manager at the Big Give has plenty of reasons to be cheerful – 2.5m reasons to be exact - as their recent Christmas Matched Funding Challenge raised £8.5m for 175 charities, vastly exceeding the target of £6m. Helen attributes the success of the Big Give’s approach to the very limited time frame within which matched funds are available. A ticking clock on the website drives home the point that donors should act now or lose the chance to double the value of their gift. Helen says this “helps people to focus on giving now as it’s not something they can put off to later.” With a proven model achieving results that fly in the face of widespread recession pessimism, the Big Give will continue to run further matched funding programmes in 2010. “We are confident that our innovative approach will inspire people to keep donating. Given the economic climate we realise that now, more than ever, donors want to make their donations go as far as possible and matched funding offers an exciting and effective way of leveraging these donations.”

Jessica Sklair, director for research at the Institute for Philanthropy completes our triumvirate of positive thinkers. “Giving has been affected but our research show donors are committed to staying the course.” Recession-related approaches taken by donors include maintaining and increasing their giving, exploring ‘spending out’ options to put foundation money to work faster and giving in non-monetary ways including pro bono help, advocating for favourite causes and giving access to networks to encourage family, friends and colleagues to give. Sklair says, “What we have seen is that donors and nonprofits are taking the opportunity in the recession to stand back and analyse how they have been giving, to take a more strategic approach.” She also describes as “very exciting” the growing interest in social enterprise; the walls between business and giving are being knocked down, and business-minded philanthropists are bringing problem-solving and social motives into their business to create new models.

Despite the expectation of better times ahead, the philanthropically-funded sector still faces many challenges, not least because of predicted cuts in government funding, which currently constitutes around 40-50% of the sector’s income. The Charity Finance Directors Group (CFDG) has released a report, Public Funding Cuts in the Third Sector: Scale and Implications, which states that whoever forms the next government, public funding to the sector will have to “fall dramatically” in order to help balance Britain’s budget deficit, with the implication that that equally dramatic increases in voluntary donations will be needed merely to stabilise sector income.

More bad news from Arts & Business, whose annual report on private sector support for the arts found a 7% decrease in individual contributions to culture in 2008/09, down £19m to £363m from the record high levels reached in the 2007/08 financial year. Theresa Lloyd, an independent consultant and author of Cultural Giving, the first guide in the UK to focus on individual giving for the arts and heritage, says, “in this time of recession the arts are unlikely to be the primary focus for many new donors, so it is even more important for cultural organisations to ensure that their existing individual supporters, who still account for over half the of the funds going into the sector, continue their involvement. The crucial task is to deliver an inspiring artistic programme. But that is not enough. Without outstanding relationship management there is still a risk that donations will drop. Now more than ever institutions should invest in ensuring that their donors know that they are valued.”

Lloyd goes on to note that many of the case studies contained in her book “highlight the crucial importance of outstanding and personalised donor communications, of ensuring that donors really understand how their money is making a real difference, and making it fun to be involved.” She concludes, “It’s about taking a long view, so that when recovery comes, and donors feel more financially secure, they will still be there for and with the institution”.

Finally, in more positive news - and on a time-line that far exceeds 2010 - a survey released by Standard Life claims that the future is looking bright for legacy income. One in four respondents claimed they intend to leave a gift to charity in their will and 18-24 year olds expressed the most enthusiasm for doing so. Whilst there is obviously a big difference between such good intentions and the reality of implementing them, the sector expert on legacies, Richard Radcliffe says, “Legacy giving numbers have increased. Since the mid 1980s the number of legators has increased from 23,000 to 39,000 in spite of fewer deaths. At the same time the number of legacies has grown from 62,000 to 109,000.” Richard claims that “most people are more than happy to give a legacy so the potential to increase current income from £1.9 bn to a much higher level is easy. Values will without doubt drop as we live longer and use our assets but it must be remembered that a legacy is just one way of giving and for pensioners who are mainly ‘liquid poor’ it is perfect!” And if charities feel the pinch in 2010 and are looking for savings, Richard cautions against making any cuts to staff working to attract this kind of gift because, “legacy fundraising has the best return on investment there is: £1 invested should result in at least £39 so every charity must do it!”