The UK Charity Sector is an integral part of Civil Society responsible for delivering a huge range of personal social services. Since the late 1970s the sector has quadrupled in size.
The British people are the second most generous givers to charity in the world and some 40% of the income of charities comes from donations, however, this figure has remained static for the last twenty years despite reforms like Gift Aid which have encouraged people to give to charity through easier tax relief structures.
The other major source is government with government funding to the charity sector growing by 20% in the last few years. With cutbacks expected in public expenditure the demands made on charity services will only increase. So where will charities get the finance they need to meet these challenges if the powerhouse of government funding is reduced? The other two major sources of finance for the charity sector is income from investments and corporate donations, but these sources are not likely to be sufficient, therefore the focus must fall back on donations from the public.
In my recent report for the Centre for Policy Studies I outline two reforms which could increase giving by the reasonably well off by some £74 Billion or put another way, this is twice the total income of the charitable sector.
The first reform would enable individuals to set up ‘Remainder Trusts’ in which sums of £50,000 or more could be donated to charity. Crucially donors would retain control over the capital and could reclaim it if they wished during their lifetime. Charities using their tax exemption status would be able to use the income from these funds to fund activities or use them as security to borrow further funds. On the death of the donor the charity should have demonstrated good stewardship of the funds and created a relationship that would encourage the donor to leave the funds through a legacy to the charity.
The second reform would be the creation of a new type of charity – the ‘Personal Charitable Trust’ based on the Canadian and US models. These personal charitable trusts would enjoy the benefits of a light touch regulatory regime and anonymity for the donor in exchange for distributing a percentage each year of the capital. Moderately wealth people could establish charitable trusts, which to date has been perceived as an option for only the most wealthy. Such a mechanism could unlock some of the £740 Billion held by the 820,000 Britons with a net wealth of more than £500,000.