Encouragingly, our 2014 report suggests that charitable giving at the highest levels remains healthy. The overall value of million pound donations increased substantially over the previous year, 33 ‘new’ donors entered the picture and the number of million pound donations was the highest since the report commenced in 2008.
Below are some observations about how recent developments are influencing the nature of philanthropy in the UK:
The influence of austerity on the charitable sector
Impact of a challenging economic environment
The charitable sector continues to face a challenging financial environment amid the ongoing push for austerity. There are implications for both charities and philanthropists in how they adapt to this backdrop.
The amount of funding flowing to the sector from government in the form of grants and contracts has fallen by £1.7bn from the levels seen in 2010/11, making income from individuals and grant-makers critical in enabling many organisations to maintain their spending. That said, it is important to note that this is not necessarily the case across the sector, and it is unlikely to be sustainable in the long term.
One way in which the sector is adapting to these pressures is to earn more income for itself. Data from the National Council for Voluntary Organisations (NCVO) shows that charitable organisations are now securing more earned income from individuals than from donations or legacies. In addition, research by Social Enterprise UK has found that around 30% of social enterprises in the UK were formed within the last three years, suggesting an increased openness to trying business-based approaches to tackle social problems.
Through positive and negative screening or active engagement, more foundations are now seeking to incorporate environmental, social, governance or other factors – including ethical – into their investment decision-making processes. Some are also thinking about how best to align how they invest with their mission. Such considerations have given rise to a growing network of some of the UK’s largest foundations, working together to develop and share best practice in relation to responsible investing. Indeed, this is becoming an international theme, with a number of foundations with endowments, such as the Rockefeller Brothers Fund, joining a movement that is choosing to divest, reflecting concerns about climate change.
Fines become million pound 'donations'
Financial institution fines donated to charity
While many forms of government funding to the sector have been reduced, central funds continue to reach charities via other routes.
Since 2012, fines imposed on financial institutions have been channelled into grants to charitable organisations, rather than being used to fund the City regulator. During 2014, it was announced that the funds generated by Libor-rigging fines, originally earmarked for military charities, would support a wider range of organisations.
As these funds were not generated voluntarily, they have not been captured as ‘donations’ in the data for this report. However, it is important to note that in 2014 many charities received grants of £1m+ from this source, including Help for Heroes, which received £2.7m to help veterans suffering from mental health issues. These funds are likely to remain a source of significant grants; in the July Budget of 2015 the government committed nearly £70m of banking fines over the next five years to support military charities and other good causes.
Fundraising in the spotlight
Fundraising practices under scrutiny
Although the charitable sector in the UK is well-developed, the scope of charities’ activities and their influence, governance and funding arrangements are regularly discussed and debated.
Some forms of ‘mass-market’ fundraising used by some larger charities, such as direct mail and telephone fundraising, have recently received a great deal of media attention, and the regulation of fundraising has been the subject of intense debate. This has culminated in a government-commissioned review, which published its recommendations in September 2015.
However, as many of our case-studies in this report have demonstrated, the fundraising profession plays an important role in encouraging and supporting million pound donors. Having well-trained people who are able to build open, honest and mutually beneficial relationships with their supporters enables more charities and those they help, to benefit from the generosity of our wealthiest donors.
Leveraging all assets
Leveraging all assets
Foundations in the UK have between them over £52bn of assets.There is growing attention not just on how they deploy their income to support charitable causes, but how they invest their endowments.
Traditionally, foundations have focused on how they achieve their mission through the use of income from their endowment. However, gradually more foundations are starting to consider how they can effect positive change, and potentially secure even more sustainable returns, through the way they think about their investments.
There are a number of ways in which this has manifested itself in recent years. In 2013, we highlighted the growth of interest in social investment – investing in organisations or funds that generate not just a financial return, but also a social and/or environmental return.
In recent years the practice of responsible investment has also come to the fore. Through positive and negative screening or active engagement, more foundations are now seeking to incorporate environmental, social, governance or other factors – including ethical – into their investment decision-making processes. Some are also thinking about how best to align how they invest with their mission. Such considerations have given rise to a growing network of some of the UK’s largest foundations, working together to develop and share best practice in relation to responsible investing. The Association of Charitable Foundations has also published practical guidance on how to develop an investment strategy with the organisation’s values and aims in mind. Growing movements such as the Divest: Invest campaign are also illustrations of how foundations are using their power as active shareholders to influence the investment landscape.
 Association of Charitable Foundations (ACF), Top 300 Report, 2015
What is the history of philanthropy in the UK?
What is the history of philanthropy in the UK?
The philanthropic impulse is likely to have existed as long as society, but the first organised charity, the King's School in Canterbury, was founded in 597AD.
Given the dominant role of the Church in the past, it is unsurprising that religious causes were the prime beneficiaries of charitable donations for many centuries. Poverty relief, human welfare and education became common recipients of the philanthropic effort during the Age of Enlightenment.
The Victorian Age (1819–1901) was a period of great growth and maturity for philanthropy in the UK. Many of today’s most popular charities, such as the National Society for the Prevention of Cruelty to Children (NSPCC) and the National Trust, were established in the 1800s, while prominent philanthropists of the time included Charles Dickens and Baroness Burdett-Coutts (granddaughter of Thomas Coutts, the founder of Coutts).
During the 1940s, the UK created a welfare state, with the basic premise that the government should provide universal health care and education, as well as other social support and protections. This still shapes the context of philanthropy in the UK today, as major donors tend to believe private philanthropy should not be a substitute for government funding in these key areas. Instead, philanthropy is seen as a way to support activity that falls outside the realm of the state or business.
Today, philanthropy is popular both politically and culturally in the UK. The government has a dedicated Minister for Civil Society based in the Office for Civil Society, who drives government policy in the area. The government also encourages charitable giving, primarily by offering tax incentives and relief to donors.
In the UK, there are three separate regional regulatory bodies for charities. The largest is the Charity Commission, which covers England and Wales, in addition to the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland.
National public fundraising campaigns such as Comic Relief/Sport Relief and BBC Children in Need have arguably become part of popular culture, and receive extensive media coverage. Media interest in reporting on major philanthropy has also increased, and million pound donors in the UK do tend to receive publicity for very large gifts, especially when the donor is happy to be named.
While some philanthropists wish to remain anonymous, there is a significant amount of information in the public domain about donors. Even so, there are efforts to further increase the flow and availability of information about funders. For example, in 2013 the Indigo Trust launched an initiative with the aim of ensuring that within five years, 80% of grants made by UK charities, foundations and others would be reported as open data to agreed standards.
The UK also has a tradition of honouring philanthropists. These honours include the Carnegie Medal of Philanthropy, the Beacon Awards and state honours. The Prince of Wales Medal for Arts Philanthropy also honours philanthropists who support the cultural life of the UK.