‘Philanthropy vacuum’ may result if government fails to incentivise donors, says report

By: 

Cheryl Chapman

Managing Editor, Philanthropy UK

In the week that Arts Council England (ACE) made "agonising and painful decisions" in passing on overall government budget cuts of 15%, resulting in 200 organisations losing their grants, cultural think tank Arts Quarter released the findings of its sector-wide consultation on the ‘Philanthropy in the Arts’ agenda as announced by Culture  Secretary Jeremy Hunt in December 2010.

The findings of ‘the most comprehensive and largest research exercise’ that Arts Quarter (AQ) has undertaken since 2008 warn of a ‘philanthropy vacuum’ if action is not taken swiftly and across the board: “Alongside the issue of capacity building, the sector is urgently calling for more extensive tax reform to promote giving. To not deal with both ends of the philanthropic spectrum at the same pace and in tandem has the potential to create a ‘philanthropy vacuum’ which could impact significantly on the potential for organisations to meet their own desired commitment as shown here to step up to the mark,” it says.

 Report author and founder of AQ John Nicholls adds: “We need to take a rounded view on action or the sector will end up having the capacity to ask but the supply of incentivised donors could fall short of meeting demand. Tensions around incentivising philanthropy effectively via taxation reform will no doubt cause much conflict and heated discussions between government departments as we attempt to migrate towards a more incentivised culture of giving. The Treasury will have to give ground if we are to successfully promote philanthropy and it may be that taxation in other forms has to rise in order to compensate the Treasury for revenues lost by incentivising giving.”

The report brings together the views of 587 arts organisations from across England, providing a clear steer to the Department for Culture, Media and Sport (DCMS) and ACE on the immediate concerns of the sector, as both bodies move to implement the key points of the announced agenda.

 While action on improving philanthropy is welcomed, respondents call for three key aspects of the agenda to be delivered immediately to allow them to meet its aspirations and offset the impacts of subsidy cuts: 

• Definition and launch of the proposed £80m match funding scheme with details of the areas it wants to see incentivised
• Urgent fundraising capacity building across the sector – providing a clear steer on areas in most need of focus
• Significant tax reform to incentivise philanthropy.

 There were also calls by respondents for:

• Further assurances that subsidy will continue to remain an ongoing and significant part of their revenue mix
• Higher levels of engagement and support by business in the arts
• Greater promotion by government generally of philanthropy within society.

 The report funded by AQ and carried out with the assistance of ACE reveals that overall, ‘the sector is evidently resigned to the fact that in a climate of cuts, little option remains but to embrace the principles of the agenda in the absence of no other solutions coming forward’.

However, respondents sought reassurance that increased levels of philanthropy must not be regarded either by donors or government as a replacement to subsidy. There was also scepticism around the viability of the call for the private sector to respond to increased calls for support for the Arts at a time when all in the Third Sector are competing for support.

 The sector also gave views on the viability of other aspects of the agenda including legacy giving, receiving gifts from overseas donors and use of the honours system to encourage philanthropy.

Close to 50% of respondents felt that the agenda would not be achieved in the short term, believing it could take between 10 and 20 years to see the desired uplift in philanthropy in the arts. Only 11.5% of respondents foresaw the agenda being realised and effective within the lifetime of this current Parliament.

Overall, the application of matched funding against first-time corporate support of the arts as a means to incentivise higher levels of corporate engagement was the most welcomed area of giving with the matching of gifts secured to support capacity building coming a close second.

Nicholls says: “This was one of the most surprising findings; we expected incentivising individual giving to be the preferred focus of the matched fund. In a recession, corporate support by way of sponsorship is normally the first to withdraw and the last to return. The call for the matched fund to be targeted at corporates might be recognition of this; or it might indicate the difficulty that organisations reported in engaging with individual donors.

“Many organisations report that they have particular difficulty in making the ask once they have identified who to ask.”

 Also surprising says Nicholls was the number of organisations who had no rationale for why people should support them – an articulated ‘Case for Support’. He said this must be a key area of focus in future training along with developing and implementing organisation-wide fundraising strategies – another key issues around which respondents said they were in need of skill support.

Just over half of respondents felt that there should be no regional preference within the match funding programme but 38% felt that priority should be given to organisations outside of London, while 43% felt that size of the organisation should make no difference to priority.

Along with the Philanthropy and the Arts report, AQ also launched an initiative Culture 2020 comprising research programmes, advocacy and events that will aim to plot and promote the continuing transformation of the UK cultural community over the next 10 years and take forward these findings.

In the last issue of the Philanthropy UK magazine, guest edited by Theresa Lloyd author of the Cultural Giving, we sought the views of sector leaders and major funders on the DCMS agenda to boost philanthropy and the Arts which revealed similar views. You can read the responses here. 

The AQ Philanthropy in the Arts findings can be downloaded for free here:https://www.box.net/shared/zgbc4q036z