So what is the good news?
The baby boomer bulge is coming
The baby boomers are about to retire. The spike of people born from 1947/48 onwards, when all those servicemen returned from the second world war, are wealthier, more liberal and more numerous than the generation that came before them.
For charities this is good news – mostly. Many baby boomers are interested in charities. They want to use their skills to volunteer. They are interested in giving to charities and supporting the causes they care about, though they are probably more demanding and discerning about charities than the more dutiful generation born before or during WWII.
The baby boomer bulge may bring 10-20 years of a relatively wealthy generation to give and volunteer. However the generational changes of wealthy baby boomers, followed by the poorer generation X, present a real challenge for charities preparing for the future.
Mass affluence is on the increase, so potential major donors are abundant
The UK population is getting wealthier: not everyone, and not all at the same time, but the increase in disposable income is continuing to grow. Disposable income has grown strongly since the early 1980s and the number of people who are mass affluent, (those with more than £50k of assets outside their house), has increased dramatically. The low level of interest rates over the last 10 or so years has only added to that wealth for many house-owners. This means many baby boomers are debt-free, and sitting on large property assets.
Of course wealth is not evenly distributed and some types of household are statistically much more likely to be richer than others. For example, a household with a couple but no children are much more likely to be in the richest fifth of households than a couple with children at home, or who have left home (children sure do cost a lot!). Conversely the stereotypical little old lady living on her own is much less likely to be in the top fifth of wealth than the bottom fifth.
All this means that there is wealth in the UK population, and that wealth is increasing. The challenge is to persuade people to give their money to a good cause, rather than just spend it on overseas holidays, flat screen TVs, iPads or the whole host of ways that leisure can absorb people’s money.
There is still huge potential in legacies
One of the most cost-effective and easy areas of fundraising for many charities has been legacies. Indeed some charities continue to have a substantial wad of legacy income, for minimal expense which they not only rely on to keep services going, but which also keeps their fundraising ratios looking healthy. Remember a Charity is a collective of charities which has tried to boost legacy income, with some success. More-over it is one of the few campaigns that has been plugging away at increasing income for a decade or more. The more that charities can move away from the old fashioned talk of residuary and pecuniary gifts, towards legacy opportunities fit for the 21st century, the more their prospects will flourish. One of the opportunities is presenting legacy and major donor giving to the mass affluent baby boomers described in the previous two points.
Learning from the Arts and Education Sectors
I am never ceased to be amazed at how little cross-over there seems to be between fundraising for charities, for the arts and for universities. They have developed different styles, different strengths and different cultures. While charities are strong on individual giving, charity shops and fundraising events, the arts is strong on major donors, corporate sponsorship and universities on alumni relationships. There are such fertile opportunities for the different sectors to learn from each other.
One notable deficit in the charity world is high level philanthropy (in the UK at least). The arts sector has some fantastic examples of very generous individuals and families: the Rothschilds, the Ruddocks, the Clore-Duffields to name but three. Universities are equally good at getting mega-donors. One obvious difference that charities could learn from is the naming opportunities in the arts and education. It’s hard to move in the arts world without a corporate sponsored performance, gallery or even organisation. For example, Tate Britain is of course named after the sugar baron of Tate & Lyle. How much donor naming goes on in the charity world? Not much. I am pretty sure all those saints that hospices are named after never made major donations!
There are also a number of regulatory and legal opportunities…
Deregulating society/charity lotteries
Charity lotteries are the most regulated source of income for charities. Every lottery from the very first a charity runs, has to make 20% contribution to the cause/profit for the charity. Imagine if a business was required to make a profit for everything it did. Lotteries should have the turnover cap lifted, the 20% contribution should be spread over time, and registration should stop being treated in the same way that casinos are.
Giving corporate gift aid to the charity
Ten years ago charities got the benefit of tax from any corporate donation – in effect a form of corporate gift aid. Then somebody had the bright idea of giving the tax back to the company to encourage them to give even more. So charities lost the tax income, and there is no evidence that corporate giving has increased accordingly. This change should be reversed, even if this would only give charities an income boost, rather than encouraging corporate giving overall.
Enhancing gift aid
Gift Aid was a major benefit to charities when it was introduced early in the Blair/Brown era. Since then its benefit has plateaued. There are plenty of ways gift aid could be enhanced to generate more income, from giving every citizen a giving allowance irrespective of whether they pay tax (in the same way as exists for personal pensions), to HMRC claiming tax back from charities not individuals.
And along these three regulatory and legal areas there is potential in social enterprise/trading, impact bonds, and a range of other areas. Indeed recent Commissions have identified a number of opportunities most of which have not been properly investigated or followed-through.
But who is going to make any change happen?
For me, the biggest challenge is who is going to shepherd charities towards making the most of the opportunities that lie ahead. I say this because one of the ways that we will see changes in charities’ funding future is by a concerted effort across a number of areas and over a period of time. But whose job is this?
The Institute of Fundraising haven’t shown much interest in plotting out a vision for income growth. Indeed they seem to be focusing much more on training and chartered status since the self-regulation toys were removed from their pram to be given to the new Fundraising Regulator. NCVO have been stalwarts in supporting the new Fundraising Regulator, but their new Charity Tax Commission doesn’t include a fundraiser on its panel, which gives an indication of its remit. Historically they have always focused more on non-fundraising income.
So while there are plenty of opportunities for income growth in charities and other non-profits. The real challenge is working out who is going to make it happen.