The Philanthropy Paradox

By Anna Josse, Co-Founder and CEO of Prism the Gift Fund

Prism the Gift Fund (Prism) is a UK registered charity- a Donor Advised Fund- that administers the giving of individuals, groups and foundations making significant gifts all over the world.

The Philanthropy Paradox, a think piece commissioned by Prism the Gift Fund looks at public attitudes and prospects for planned giving, highlighting worrying negative attitudes towards philanthropists at a time when the third sector most needs the support.

The report is based on a survey conducted by NatCen with over 1,200 people. Most interestingly, it highlights a paradox, which is that the majority of people agree philanthropy makes society better, but almost a third do not believe philanthropists themselves are good for society.

“This Think Piece describes and illustrates a paradox that has implications for all who care about building a stronger charitable sector: that the British public feels far more positively about the fruits of philanthropy than it does about those who fund it,” said Dr Beth Breeze, the writer of the piece. In addition, the report reinforces two known paradoxes – that donors tend to benefit alongside those they intend to help, and that wealth accumulation tends to precede distribution.

A disconnect between philanthropy and the donor

It is concerning that there seems to be a disconnect between the impact of philanthropy and the donors making the gifts. There is a danger this could lead to HNW individuals deciding to curb giving to protect themselves. Why would they want to be targeted by media or others in a negative light? In turn, charities are denied those larger private income streams. The advisors to donors need to help their clients navigate this.

How does the private client industry, and their clients, address the paradox that welcomes donations but labels donors as “money grabbing, tax dodgers”? (Terminology used in the survey responses). Clearly education is vital on a number of levels:

1. Education from primary school age is key to ensure everyone has a responsibility to give. To rely on the British government has been a default position for many years and we can do this no longer.
2. In terms of UK tax breaks, many individuals are aware of Gift Aid but not the extent of its
   

   Anna Josse

   application. Advisors need to be educated themselves around all the tax breaks and inform their clients. There is between £500-£750m unclaimed in Gift Aid every year[1]. Why? Clients simply don’t know how Gift Aid works. Gift Aid has a split tax incentive between the donor and the charity. The charity is eligible to claim 25% extra on a donation from HMRC. If a donor pays tax above the basic rate, they can claim the difference between the rate they pay and basic rate on the donation. For example, a donation of £100,000 becomes £125,000 after application of Gift Aid. This would cost a 45% taxpayer £68,750 after making a Gift Aid reclaim on their tax return.

3. Even less have heard of gifts of shares or property*. The UK government set up The Giving Campaign in 2003[2]. They believe it did help raise awareness of the Gift Aid tax incentive but singularly failed to make donors aware of any other incentives. And almost 20 years on, nothing has changed.

Therefore, educating private client intermediaries on charitable tax reliefs is critical to informing their clients on the full reliefs available to them. And this would apply to the tax reliefs of other jurisdictions, not just the UK.

4. These tax incentives still mean a donor gives money away that they could have personally benefitted from. There seems to be a huge misunderstanding about these incentives. The British government should actively encourage these incentives and educate the public that not only do they exist, but they are legitimate forms of giving to be encouraged.

Learning from other countries on major donor fundraising

There is much to be learnt about philanthropy from the Americans and Europeans. And where there are better and smarter forms of giving, let’s embrace that and learn from one another. The same conversation about simpler forms of giving, has been taking place with successive governments in the UK for the last 20 years with limited progress.

And the reality is charities rely on both smaller and major donors. British charities have historically been very good at raising funds from the general public – brilliant at direct mail and securing government grants. However, when you look at some of the very large UK charities and their accounts, often you’ll see only about 8-9% of funds are raised from major donors.  It illustrates that British charities have a lot to learn from other countries about major donor fundraising.

All forms of giving should be celebrated and encouraged

Rather than castigate and shame these successful and sometimes generous individuals, let’s encourage more of them to give and give more. And advisors do have a key role to play in this motivation and education. The challenge is to align all of society – so that all forms of giving are celebrated and encouraged. In the UK, there is a ~£10bn gap that currently exists in charitable expenditure[3]. Maybe philanthropists and their advisors can help plug that gap or assist in looking at innovative ways of contributing to it.

Let’s learn from the positive aspects of philanthropy; garner more encouragement of philanthropy through knowledge around the tax incentives and where appropriate follow some of the great philanthropists in Europe and USA and celebrate their generosity. Britain may be an island again after Brexit but the wonders of modern technology and a post Covid-19 world means the global world of philanthropy can work together.

[1] https://www.huntsforum.org.uk/new-post/

[2] https://fundraising.co.uk/wp-content/uploads/files/campaign_review.pdf

[3]https://www.civilsociety.co.uk/news/charities-face-10-billion-funding-gap-over-the-next-six-months-due-to-covid-19.html