Posted by:
Andrew O'Brien
Article read time:
4 minutes
Environmental, social, governance (ESG) Gift Aid Tax and VAT
8 April 2015, 10:21
Gift Aid could be the key to encouraging a culture of giving
Charities Aid Foundation has released its latest UK Giving report for 2014 which provides an excellent insight into the state of giving and donations in the UK. One of the key lessons that I believe that we should take from the report, however, is that more needs to be done to encourage a culture of charitable giving in the UK – one of the key asks from the sector in the latest Managing in a New Normal report. This is particularly important for young people. A lot has been written in recent months about the need for the sector to do more to reach out to older people, and obviously this needs to happen. Our country is getting older and generally, older people have more disposable income to give to charity than younger people making donor recruitment more cost-effective. But in a time of tight finances where charities are looking for maximum bang for their buck, it is important as a sector that we do not lose sight of a need to build the ‘pipeline’ of donors for the future.
Donors are creatures of habit
Giving regularly to charity is a habit and research tells us that habits are hard to break. So the longer a person doesn’t engage in charitable giving, the harder it will be in the future to get them to do so. It will also mean that we will need to spend more resources to get them into the habit. CAF’s survey has found that only 26% of people aged 16-24 donated money to charity within the previous four weeks of being polled, in contrast to 39% of people aged 25-44 and 44% of people aged 45-64. Of course, there are significant factors which lead to this result such as the lack of disposable income that young people have, irregular income sources and the recession has hit young people particularly hard. However, while this would explain why young people would give significantly less than older people (around half as much on average according to CAF’s survey), it doesn’t explain why significantly fewer young people are not giving at all. I am optimistic about young people’s desire to contribute. Most would like to give, but I have spoken to many friends and family who believe that small contributions are simply not worth making. They are more hassle both for them and the charity. But over the long term, small contributions at an early stage are crucial in helping to build that habit of giving that can be valuable in later years.
Gift Aid is a powerful incentive for small donors
One of the best ways that we can try to attract small donations is to show the value that they have to charities. Communicating the importance of small donations may encourage more young people to give, making them more willing to donate, even if it is a small amount. Another way that we should try to encourage more young people to give is to promote existing tax reliefs such as Gift Aid and Gift Aid Small Donations Scheme which significant boost the value of small donations. The fact that Gift Aid increases the value of a donation by 25% is a powerful message and may encourage those who feel that they aren’t giving enough to make it worthwhile. The fact that young people are also more likely to give cash than older donors, also makes improving awareness of the Gift Aid Small Donations Scheme important (and reforming it to make it easier for charities to claim). Although incentivising giving is not the main reason for tax reliefs, policy makers should not ignore the potential of attractive tax reliefs to boost giving. Young people are also less likely to stick to giving to one charity, which makes communicating with them harder for charities to do individually. This is why it is important for the government to support the sector in growing this culture of giving.
Charities cannot do this on their own
It has been 15 years since the Government redesigned Gift Aid. As charities need to generate more of their income from donations; it is time for Treasury, HMRC and Office of Civil Society to consider how it can be refreshed to improve uptake and make the most of this powerful incentive to give – particularly amongst young people. A government funded, but sector-led, campaign on Gift Aid making use of new digital channels, fundraising campaigns like #GivingTuesday and providing charities big and small with new resources to communicate with donors about these reliefs, could be a big step to achieving this. As all parties think about how they can support the charity sector when they enter office, it is important that they do not seek to reinvent the wheel. Tax reliefs such as Gift Aid and Gift Aid Small Donations Scheme have the potential to boost the sector’s income and help charities meet rising demand. The next government should work with the sector to make sure that we make the most of these tools.
This post was last reviewed on 18 October 2018 at 16:42
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