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  1. Wealth
December 18, 2012

Charitable Donations Drop This Year: Have We All Become Scrooges?

By Spear's

With several reports suggesting that charitable donations have fallen, has the threatened government squeeze on charitable donations prompted donors to rethink their giving strategy or are we all turning into Scrooges?

Judging from the recently published Charities Aid Foundation report ‘UK Giving 2012’, one could be forgiven for thinking that the traditional season of goodwill might come and go this year, without much evidence of charitable benevolence in the form of hard cash.  

The report shows that charitable donations in 2011/12 fell by 20 per cent compared with the previous year —  which equates to a drop of £1.7 billion (£2.3 billion in real terms adjusting for inflation) in terms of charitable giving.  

This is supported by the latest ‘The million pound donors 2012 report’ produced by Coutts bank last week, in association with the Centre for Philanthropy at the University of Kent, which reveals 232 donations of more than £1m this year; the highest in 5 years. And yet, while the number of donors may have increased significantly (up by 58 compared with last year), the overall value of donations has fallen by £71million.

What was interesting to me was that the report found that there had been an increase in the money passing directly to the front line (i.e. going direct to the charity) rather than being ‘banked’ in foundations.

This runs contrary to what I have seen in practice — namely a lower level of work from operating charities, whose budgets have diminished, but in contrast an increase in the number of philanthropists setting up their own charitable foundations.   

Bah Humbug! Charitable donations have fallen this year.

It may be that the threatened governmental squeeze on charitable donations through changes in the tax system prompted donors to re-think their giving strategy.  

Although the proposed cap on income tax relief on large donations was withdrawn, the proportion of donors using Gift Aid has dropped for the first time since the CAF surveys began some 8 years ago. 

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It was also noteworthy that lifetime giving and donations by individuals (rather than foundations) are far more significant in terms of value than donations on death. It remains to be seen how much an impact the reduction in the rate of inheritance tax on death from 40 per cent to 36 per cent where 10 per cent or more of the estate goes to charity, will have.

However, with the proposed reduction in the top rate of income tax from 50 per cent to 45 per cent due to take effect in April 2013, my advice would be to cash in on the Cratchit cache and donate now while, when it comes to giving, the going is still good.
Sophie Mazzier is counsel at Maurice Turnor Gardner

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