Despite seeing their income increase by 10% in the years preceding the pandemic, Britain’s wealthiest people reduced their typical donation to charity by more than a fifth during the same time.
A study for the Law Family Commission on Civil Society, Mind the Giving Gap: Unleashing the potential of UK philanthropy, shows a significant decline in declared donations from the nation’s top 1% of earners – those with pre-tax personal incomes of £175,000-a-year or more – despite soaring incomes in recent years.
The study found that typical donations from the UK’s top earners dropped by 21% in real terms between 2011/12 and 2018/19, despite the typical annual income among this group rising by 10% over the same period.
While typical annual earnings in this group jumped from £247,000 to £271,000 over this period, the typical charitable donation declared on their tax returns fell from £680 a year to £538 a year, or £45 a month.
The analysis reveals that although earners in the top 1%, totalling around 344,000 people, earn 14% of pre-tax income in the UK, their declared donations equate to 6% of the total donations to charity from the public.
Overall however, the value of charitable giving from the public as a whole has increased. In real terms, giving to charities, including donations, legacies and fundraising, has increased from £14.8 billion in 2011-12 to £19.6bn in 2018-19.
Chaired by former Cabinet Secretary Lord Gus O’Donnell, the Commission is calling for action to help close the “generosity gap” among the UK’s highest earners. Nationally, the Commission is recommending the government appoint a Philanthropy Commissioner. At the local level, it is calling for Philanthropy Champions to work alongside Metro Mayors across the country.
Among its key findings, the report, which was carried out by Pro Bono Economics for the two-year Commission (which launched in November last year), identified that:
- Charities missed out on £2.1bn of income (including Gift Aid) between 2011/12 and 2018/19. This is the extra income they would have received had the value of declared donations from the top 1% grown in line with the group’s soaring income level.
- There is a “generosity gap” within the super-rich worth a potential £1.4bn a year to the nation’s charities. Nearly two-thirds (63%) of the total value of money donated by the UK’s top 1% comes from less than 0.5% of the group – equivalent to 1,700 individuals. Donations across the wider group typically account for 0.2% of individuals’ incomes. According to the research, UK charities would benefit from an extra £1.4bn each year if every member of the top 1% lifted their donation rates to at least 1% of their income.
- Typical giving among the super-rich is no higher in proportional terms than that recorded across the wider population. The analysis for the Commission reveals that although those in the top 1% earn 14% of pre-tax income in the UK, their declared donations account for just 6% (or £950m) of the total donations made to charity by the public.
Also according to the research:
- Members of the top 1% with annual incomes of around £187,000 typically declare donations of around £33 a month, equivalent to 0.21% of their income.
- Among the richest fifth of the top 1%, those with annual incomes averaging £722,000, the typical declared donation rises to £113 a month – or 0.16% of income.
- Across the wider UK population, typical donations among those who support charities stand at around £20 a month.
To tackle this decline in philanthropy, the Law Family Commission on Civil Society is calling for a collaborative effort between the charity sector, central and local government, philanthropists and business.
The Commission is supporting proposals that the government appoint a Philanthropy Commissioner to coordinate action across Whitehall in this area. It notes that the Treasury lacks any resource dedicated to supporting or growing the £20bn the public gives through philanthropy each year and is therefore also calling for the appointment of a lead civil servant in the Treasury to work on philanthropy.
And with the study revealing that people living in the wealthiest areas of the UK declare seven times as many donations to charity as those in the most deprived areas, the Commission is further recommending that action be taken to drive up place-based philanthropy in areas which need it most.
This would include the nomination of Philanthropy Champions working with Metro Mayors across the country to encourage their peers to give to good causes, and a place-based matching scheme linking government funds to public donations.
Lord Gus O’Donnell, Chair of the Law Family Commission on Civil Society, said:
“The British public has a rich tradition when it comes to charity, epitomised by the millions of acts of kindness and support we saw at the height of the pandemic. It also shows in the £20bn the public gives through philanthropy each year.
“But this new research for the Law Family Commission on Civil Society shows that those with the deepest pockets can afford to reach a little further. Among the top 1% in Britain, there is a generosity gap between a handful who give very significant amounts and the majority who give substantially less.
“The Commission is calling for a collaborative effort between philanthropists, the government, business and the charity sector to help close this gap.
“There is a leadership role for the government in this. We support proposals for a government-appointed Philanthropy Commissioner to drive this agenda and would like to see a lead civil servant in the Treasury devoted to philanthropy.
“At a local level, the nomination of Philanthropy Champions working with Metro Mayors could help to ensure philanthropy is directed to the communities that need it the most.”
Commenting on the report, Mark Greer, Managing Director of Philanthropy at Charities Aid Foundation, said:
“During extraordinary times, we have seen philanthropists step up. In fact, donations and legacies from CAF’s private clients into charitable trusts increased by 26% last financial year.
“The pandemic has highlighted the vital role that charities play in our society and there are a number of ways philanthropy could be further encouraged to support them and, in turn, the number of people and causes they help. A Philanthropy Commissioner would help to drive to forward a governmental agenda on giving. Placing the emphasis at the local level to promote a feeling of a shared place and ownership would also ensure that communities are empowered, helping the Government to deliver on its plans for levelling up.”