Faster, higher, stronger: Olympic lessons for philanthropy

This article first appeared in Alliance Magazine.

Coming from ancient Greece, even the word ‘philanthropy’ hints at similarities with the Olympic Games. And there is much which philanthropists, donors, charities and those of us who support and guide them can learn from the athletes whose ambition and tenacity have brought them to London 2012. Inspired by the five rings – themselves symbolizing the five continents that participate – we focus on five lessons of the Games.

Federer doesn’t box 

Athletes choose one sport and do it for years, to the exclusion of other sports, until they become excellent. It’s the selectiveness that enables them to excel.

Great donors focus likewise. The Wellcome Trust – the UK’s largest charity – works solely for ‘extraordinary improvements in human and animal health’. The Gates Foundation, the largest charity ever, focuses on just three issues: global health, international development, and secondary and post-secondary education in the US. The Shell Foundation – one of the very few foundations to publish details of its failures – believes that focusing on one issue (developing social enterprises working on development and environmental issues) enabled it to learn what was failing and hence quadruple its success rate.

Hence the advice of the entrepreneur and philanthropist Andrew Carnegie to ‘put all your eggs in one basket and then watch that basket’.

Where’s the target? 

Knowing whether you’re succeeding and improving is easy in archery or high jump or swimming, so athletes know whether adjustments to their technique are paying off. The feedback loop is short and clear.

Few donors have that. Their goals may be long-term (eg finding cures for cancer), their impact may be too diffuse to be measurable (eg improving wellbeing), and/or there may be good reasons why people won’t tell what they’re doing or why (eg reducing corruption).

Yet ambitious donors find feedback from which they can learn. They might only use techniques already proved to work. They ask grantees for feedback, eg through Grantee Perception Reports run by the US Center for Effective Philanthropy. They monitor the costs created by their reporting and applications processes. 

All sports are team sports 

The tears of Andy Murray’s mother and girlfriend after the Wimbledon men’s singles final are testimony that even ostensibly solo athletes are part of a team. Even tennis players invariably thank the coaches, physios and managers on whom they rely.

Similarly, great donors work with others whose skills complement theirs. Hence Comic Relief and the Henry Smith Charity – both funders with a single office in London – team up with community foundations to distribute to small, local organizations.

To eliminate hepatitis B in China, the Hong Kong-based ZeShan Foundation partnered with Stanford University to vaccinate children in one district of one province. Then it enlisted other donors to cover the whole province. Eventually the Chinese government joined the team, announcing that it would vaccinate all children under 15 across the country.

Legs alone don’t win marathons

Serena Williams said she’d award her Wimbledon 2010 title to her serve, and though it may seem that serves are executed by arms, they involve the whole body’s strength – notably the legs, which often surprises beginners.

Similarly, donating organizations (eg foundations) and operating organizations (eg charities) need a full set of skills, not just the glamorous parts or most obvious pieces. Hence they need strong core functions, for which they often need unrestricted money. Jim Collins, author of Good to Great, wrote that: ‘To make the greatest impact on society requires first and foremost a great organization … Restricted giving misses [this] fundamental point.’ His view is supported by research showing that the more an organization invests in its core functions – ie the higher its ‘admin’ spend – the higher its performance. There’s a reason why tennis players do pilates.

Using everything they can

Winners will use their physical strengths and mental strengths, the weaknesses in their opponents’ armoury, even their opponent’s own strengths in creative ways in their quest to win.

As do outstanding donors, of any scale. The Esmée Fairbairn Foundation has meeting rooms that it lets charities use. Bill Clinton has access, so he hosts glitzy events to inspire and prompt the glitz-seeking rich into giving. Goldman Sachs has financial wizards so it created an innovative financial bond which is accelerating deployment of vaccines. McKenzie Steiner, a six-year-old girl cited by Clinton in his book Giving, had time and friends, so organized a collective beach cleanup.

Faster, higher, stronger?

The world record speed in the men’s 100 metre sprint has improved by 10 per cent in the last 100 years (9.6 per cent from 1912 to the current record set in 2009). The social and environmental problems that philanthropy seeks to solve have, as Warren Buffett puts it, ‘already resisted great intellects and often great money’. Improving philanthropy’s effectiveness by 10 per cent would make a remarkable dent

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How to read (a lot of) my book for free

You should get the book – and you can, from here. But a lot of it is available free, for example in articles. Here’s a round-up.

Opening: Why care about this, the 10 minute guide to giving well, contents table

Section 1: What you need to know

Chapter 1: How to choose a cause

Chapter 2: Charities’ administration costs (also here, in the FT)

Chapter 3 (part): Breadth vs. certainty

The above are all available in the Kindle preview. Make sure to scroll to the start: it opens part-way through.

The rest of Section 1 is only in the book: covering theories of change, and the defining feature of the charity world.

Section 2: What you need to do

Ch 6. Finding a great charity. This is partly covered here in Money Week,

Ch 7. Dealing with common situations, and myths: whether to sponsor somebody in the marathon is covered here, and supporting Sport Relief (=Comic Relief) here.

Ch 8. Helping and not hindering: for example, giving if you have no money, here in the Daily Mail. The general rules are touched on here, in The Ecologist.

Ch 9. Using money without giving it: you’ll have to read the book!

Section 3: What to do if you’re giving a lot

For most of this – how & why to decide a focus, the range of tools available, partnering, getting a good process and tracking your own impact – you’ll need the book. Article here on the wastage which foundations create by having bad processes.

Ch 15: Corporate giving: outlined here in Ethical Corporation and here in the Guardian.

Section 4: Advanced theory

Ch 16: Charities results: this article about counterfactuals gets to some of it. As does this about Goldman Sachs‘ dismal impact reporting. There’s a great deal more insight in the book.

Ch 17 & 18: Size, growth & mergers; Charities and government: material is in the book.

Ch 19: Principles of good giving: outlined here, in Alliance magazine.

Appendices are in the book. But all the calculations are here, as is the application form I suggest.

How do you prove your impact if you’re new? Like this–>

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Nice letter about my book in the Guardian

From somebody who should know, the CEO of the Association of Charitable Foundations, David Emerson:

The Guardian’s (unrelated) full review of the book–>

Posted in Books, Uncategorized | 1 Comment

How foundations discourage charity mergers

This article first appeared in Third Sector magazine.

Esmee Fairbairn Foundation (a large UK grant-making foundation) has launched a fund to encourage mergers. It’s ironic, because Esmee’s own rules penalise them

Fairness, presumably, is behind the Esmee Fairbairn Foundation’s rule that it (normally) will only give a charity one grant at once. But it’s misplaced. One effect is that it discourages mergers which, through a new fund announced last week, Esmee Fairbairn Foundation is – somewhat ironically – trying to encourage.

I personally have seen mergers killed by this rule, which sadly isn’t unique to Esmee. Once upon a time, I was exploring a sensible merger between two charities, both of which fitted Esmee’s areas of interest. Separate, we were eligible for two grants. Combined, we’d have been eligible for just one. By merging, we’d automatically forfeit our eligibility for a second grant. For us, that price was too high and it nuked the deal.

The evil twin of the ‘one at a time’ rule is some funders’ obsession with small charities. For example, the Polden-Puckham Charitable Foundation will only fund charities with revenue below £300,000. So, separately, two charities each with revenue of, say, £200,000 might be eligible for two grants, but combined, they’d be eligible for none at all.

Notice that in each case, those charities are disqualified irrespective of the quality of their work. What?? Surely, now that we’ve all noticed that some charities perform better than others, foundations and others should allocate charitable money solely on the basis of performance, rather other spurious criteria like these. 

Notice too that the disqualifications are irrespective of the logic of the mergerThe case for mergers is very strong, for two basic reasons. Firstly, large organisations can normally do things more cheaply. For instance, two charities each with revenue of £500k will pay two audit fees, whereas one of £1m will only pay one. And secondly, staff in bigger organisations are typically more productive. The Economist recently reported that, for example, workers in European manufacturing companies with over 250 workers create 30-40 per cent more value each than workers in firms with fewer than 10 employees. This is partly because they can ‘focus on a specific problem [and will] not be asked to fix the boss’ laptop as well’. If we could solve global poverty or nail cancer 30-40 per cent sooner just by mashing some organisations together, then we should do so without delay.Click here to find out more!

But what about fairness? The problem is that Esmee has got the wrong unit of analysis. It’s trying to be fair to charities. But who cares about charities? We should all, charities included, obsess instead about what’s best for beneficiaries. We can see this by doing a thought-experiment for a second. Suppose there are three charities in a particular sector, two of which are brilliant at serving beneficiaries and one is rubbish at it. Is it ‘fair’ to beneficiaries to support those charities equally? Hell, no! The beneficiaries are best served if the good charities are enabled to grow and take over the work of the rubbish one, which is killed off, toute suite.

These foundations’ arbitrary rules are not based on evidence or merit, and therefore do not promote performance. Just as evidence-based medicine has saved a squillion lives, and evidence-based policy is saving squillions of tax-dollars, it’s time for philanthropy to be based on evidence about what works – and that alone.

Who is looking at which charities are best–>

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MoneyBox Live: good questions to ask

I’m on BBC Radio 4’s MoneyBox Live today, answering questions from the public about charitable giving. Do call! (Here’s how.) I’ve suggested some questions you might like to ask – about which charities to back and how – and some boring topics to avoid.

Particularly interesting questions

– Charities make lots of claims about how good they are. How do we know if those claims are true?

– What are the best ways to give?

– Is it true that big funders waste lots of resources? [Yes] How can I / they avoid that?

– Can my company do anything charitable? What are the best things for a company to do? What are the best examples of corporate giving? [Answer: Goldman Sachs’ work on the IFFIm]

– I’ve got no money but I’d still like to help charities. Any ideas of what I can do? [Yes]

– Are Oxfam goats (etc.) a good way to help a charity? MoneySavingExpert says that often your money might not actually go to buying a goat. Does that matter?

– What do charities actually do with all their money?

– Why aren’t charities more open about what they do? [I don’t know: I’ve said before that they should have public AGMs, for example.]

– People often draw parallels between charities and business. But can’t it learn also from other disciplines? [Yes, lots]

– There seem to be lots of philanthropy advisors. How do I know the basis on which they advise? (Well, you know the basis Giving Evidence uses because it’s laid out in an entire book.)

Passably interesting questions

– How do I find a great charity? [Or] I’ve found a charity: how do I know if it’s any good?

– Charities spend too much on advertising.

– Why don’t charities tell you how much of your money goes to the actual cause?

– Why’s there no ranking of charities? [Or] What are the best charities in the UK?

– Why are there so many charities? Surely they should consolidate a bit?

– Why are so many charities based in London?

– Many charities have lots of money already. Should that affect whether I give to them? [Yes: but not always in the way you’d think.]

– Should I set up a foundation?

– Small charities are better than large ones:  they’re more efficient.

Boring questions to avoid 

– What are the most tax-efficient ways to give? [The answer to this Q is very detailed, depends on the context of your own finances, and anyway, the gains from giving tax-efficiently are tiny compared to the gains from choosing the best charities and giving in the best ways. Tax efficiency might gain you 60%, but choosing a great charity could easily gain you 200%, sometimes 2400% (yes really), and giving in the best ways gained Shell Foundation about 400%]

– Anything related to the recent charity tax fiasco. What was the gov’t thinking? [We don’t know.] How much would the change have cost charities? [We don’t know.] Which charities would have been hardest hit? [We don’t know.]

– What’s the difference between charity and philanthropy? [Nothing. Different people prefer different words, that’s all. Let’s focus on achieving stuff, not which words best describe that stuff.]

– Anything which relies on the assumption that giving in America is good, and/or that we should have more American-style giving here. Only if you want even lower social mobility and really haven’t notice that the UK and the US are very different places.

What have Cheryl Cole and Prince Charles been up to?—>

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Why I’m delighted to be working with Innovations for Poverty Action

Innovations for Poverty Action, the most influential charity you’ve never heard of, and J-PAL tackle poverty in less developed countries by rigorously investigating poverty, the effectiveness of poverty-reduction programmes, and supporting the expansion of the best. Their main investigative tool is the randomised control trial, developed in medical research (where it may well have quietly saved your life several times) now increasingly used elsewhere. Randomised control trials (RCTs) are powerful because they, uniquely, demonstrate what happened which would not have happened otherwise, i.e., the true impact of a programme. The sample size, duration and rigour of IPA & J-PAL’s studies makes them a great deal more robust than most charity/development evaluations.

IPA & J-PAL have run more than 400  studies in 40 countries, across many aspects of poverty, including health, education, agriculture, governance, micro-finance and environment. Its research is normally led by tenured academics, many at universities such as Harvard, University College London, the London School of Economics Massachusetts Institute of Technology, Yale, and most of it is published in respected peer-reviewed journals. The evaluations are normally of programmes run by NGOs and/or governments. J-PAL is a network of over 80 academics and IPA now has 600 staff in 14 offices. Typical research questions include: 

–          Do better cook-stoves really save all the carbon, fuel, time and health problems which their advocates claim? (Answer: sadly not.)

–          Which is a better way of getting teachers to turn up to school in India: giving them financial incentives to attend, or putting cameras in class rooms? (Answer: cameras are  miles better.)

–          To dissuade poor parents from taking their children out of school, you might give them cash when their children come to school (‘a conditional cash transfer programme). The conditionality is quite expensive to administer, so does it matter if you ditch it? (Answer: not in Colombia, but yes in Malawi.)

Caroline Fiennes, Director of Giving Evidence, is now working with IPA in Europe, aiming to raise awareness of the method, usage of their research findings, and resources to enable further study and further uptake of the findings. I’m delighted: given my passion for giving based on the evidence of what works, it’s natural to support more which generates, uses and shares that evidence.

microfinance ghana

That extreme poverty persists, and now only a few hours flight from our comfortable lives, is one of the biggest shames of our age; and J-PAL and IPA deploy against it the scientific method, perhaps mankind’s greatest achievement. As a result, it has a cupboard full of surprising insights which need to be heard and used.

What’s the difference between IPA and J-PAL (the Abdul Latif Jameel Poverty Action Lab at MIT)?

IPA and J-PAL are sister organisations, both doing RCTs in development, and they collaborate more closely than any charities I’ve ever seen. For instance, their names – which share the ‘poverty action’ bit – are deliberately similar.

J-PAL is a network of academics, based at MIT and now with centres in four other universities (in India, South Africa, Latin America, Indonesia). Hence J-PAL’s studies are all undertaken by academics. IPA is a free-standing charity. Its studies are often led by academics (many of whom are affiliates of both IPA and J-PAL) but sometimes led by IPA staff. This provides an important freedom. Academics are incentivised to do studies which will get published, which encourages innovative studies. Those are important and J-PAL academics frequently do them.

But suppose somebody’s studied cook-stoves in northern Kenya and now we need to see if the surprising findings are also true in southern Kenya: despite being important, that study is pretty unattractive to an academic, but IPA might well do it.

IPA and J-PAL deliberately avoid having offices in the same countries as each other.

By a weird quirk of fate, the leaders of J-PAL and IPA are actually sisters. J-PAL was co-founded by Esther Duflo (MIT professor, and co-author of the prize-winning book Poor Economics), and IPA’s CEO is Annie Duflo. IPA was founded in 2002 by Professor Dean Karlan at Yale University: Dean did his PhD with Abhijit Banerjee, the other co-founder of J-PAL.

Are RCTs really better than other forms of evaluation?

Yes, a lot. Explained here, about Goldman Sachs, and here about evaluations in general.

charity evaluation

But RCTs can’t be used in all circumstances.

Correct. Nobody said they could. Their limitations, and what to do about them, is discussed in my book.

Doesn’t helping IPA and J-PAL raise money conflict with Giving Evidence’s work advising donors?

Not really. First, it’s hardly a secret – and I discuss it explicitly with donors to which it pertains. Second, it’s no secret that I advocate giving based on evidence, and hence is hardly surprising that I’m working with the people who generate it. Third, it means that I’m hooked into some of the world’s best thinking about using evidence to improve performance, which is pretty handy for clients. Fourth, in any instance where a donor is interested in development work, I’m ‘acting for’ the donor rather than IPA/J-PAL and IPA/J-PAL know that. Fifth, I have no performance incentive with IPA/J-PAL. Etc etc.

IPA and J-PAL sound great. How do I…

– find out more? Here

– find the research?  (IPA’s research is all summarised here (and here are summaries of J-PAL’s research.)

– give them money? Either here, or we’re setting up a UK mechanism: coming soon.

– support good programmes they’ve discovered? Either here, or we’re setting up a UK mechanism: coming soon

– contact you for advice about my/ my company’s giving? At enquiries [at] giving-evidence [dot] com

The FT on how (as result of J-PAL’s work) development is becoming a science—>

The Economist on findings of a J-PAL study and IPA replication about nailing poverty—>

Bloomberg on how J-PAL, IPA and RCTs “speed our way toward a better world”–>

RCTs find how to buy one, get 24 for free!—>

Posted in Great charities, Impact & evaluation, Uncategorized | 5 Comments

The giving tax: what do we actually know?

In the current row about charities and tax, it’s worth being clear about what is known and what isn’t. Here’s the relevant evidence we’ve encountered.

Income

Total income of UK charities £37bn Source:NCVO Almanac
Income of UK charities from individuals (i.e., excluding gov’t contracts, earned income etc.) £11bn NCVO Almanac
Income from higher-rate tax-payers ~£1.4 bn NCVO briefing about the tax cap’s impact

Tax relief (or ‘tax subsidy to charities arising from donations’ or whatever your preferred language is)

Total UK tax relief on donations1 £910m HMRC: http://www.hmrc.gov.uk/stats/charities/table10-2.pdf
Total UK tax relief on donations excl. inheritance tax £450m HMRC: http://www.hmrc.gov.uk/stats/charities/table10-2.pdf
Amount of that given to non-UK charities2 Unknown, but probably very small. HMRC may know but isn’t saying.
Tax relief on gifts from higher-rate tax-payers £360m (of the £450m) HMRC: http://www.hmrc.gov.uk/stats/charities/table10-2.pdf
VAT paid by charities >£1bn Charity Tax Group

Impact of the proposal

Income which stands to be affected Unknown. HMRC will know but isn’t saying. It’s not knowable by outsiders because charities only know about what is given to them: they may well not know about a donor’s donations to other charities, i.e., whether the donor is giving enough elsewhere to get above the cap, or what ‘other’ tax avoidance measures they’re using, e.g., business losses.
Estimated charity sector income which stands to be lost Unknown
Estimated gain to Exchequer of the cap on all tax avoidance mechanisms £300m BBC: http://www.bbc.co.uk/news/uk-politics-17726548
Estimated gain to Exchequer of including charities in the cap ~£60m£50-100m Sunday TimesBBC: http://www.bbc.co.uk/news/uk-politics-17726548
Estimated gain to Exchequer of cutting the 50% tax rate ~£100m

Would the proposed tax changes change donor behaviour?

We don’t know. Evidence is mixed:

  • No, implies a randomised control trial of 50,000 donors in the US3.by development economists at Yale and Chicago. Donors who were told that their donations would be ‘matched’ were more likely to give than those who weren’t, but the level of matching (some were offered a $1 match for each $1 they gave; some a $2 match; some a $3 match) made no difference.
  • Yes, implies a study by Sarah Smith of the University of Bristol’s Centre for Market and Public Organisation. By looking at how giving changes when GiftAid rates changed, they concluded that ‘the loss in donations following a cut in the rebate would be greater than any increase in tax revenue’.

1 Includes tax relief on: payroll giving, GiftAid, shares. Excludes relief on inheritance tax (=£460m) and tax reliefs given to charities (e.g., stamp duty), which collectively = £2.73bn.

 2 Under a 2009 EU ruling, UK taxpayers can reclaim UK tax on donations to charities anywhere in the EU.

3 “Does Price Matter in Charitable Giving? Evidence From a Large-Scale Natural Field Experiment,” by Dean Karlan at Yale and another development economist at Chicago. http://www.econ.yale.edu/ddp/2006/ddp00013.pdf.

Among donors who received a matching-gift appeal, contributions were 19 percent higher than among those who were simply asked to make a gift. And 22 percent more of the donors who got a match offer made a contribution.

But the more generous match offers of $2 or $3 for every dollar donated did not significantly lift contributions. Donors who received the one-to-one matching offer gave a total of $10,431. Those who were told that each dollar given would be matched with $2 contributed $11,423, and those who were offered $3 for every dollar contributed donated $10,439.

So the gov’t’s proposal makes no sense, but neither does the campaign against it. Here’s what the government should do—>


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How can innovative organisations produce evidence of their impact?

This article was first published by the Society of Impact Assessment Analysts

‘If something isn’t working, do something else’, goes the saying. Though it sounds obvious, we often don’t follow this advice. Many of the social and environmental issues we’ve been trying to address for years persist; clearly, our approaches aren’t working very well.

Hence there is a clear need for innovation in tackling entrenched social problems. However, if we demand evidence of an organisation’s past performance, we in effect discriminate against innovations, which don’t yet have a track record.

And yet there is a way to judge them. Good charities will have good ideas, and implement them effectively. If you’re into formulae, think of it as: Impact = idea x implementation.

Any good organisation will be able to answer the following questions, at the very least:

Idea:

  • What’s the problem you’re trying to solve?
  • What activities does the organisation do?
  • How do those activities help solve the problem?

Implementation:

  • How do you find out whether you are achieving anything? (i.e., what is the research process?)
  • What are you achieving? (i.e. what results does that process produce?)
  • How are you learning and improving? What examples do you have of learning and improving?

The answer to judging innovations lies in the third question. This, of course, asks for the organisation’s theory of change: the logical route through which its actions are supposed to achieve its intended impact. An established charity should have evidence that connects its activities to its goal: when it distributes chlorine at village water pumps in Kenya, diarrhoea declines, and when it doesn’t, it doesn’t.

A charity with a new or complicated theory of change can’t do that. But any charity should be able to produce some evidence for each stage of its theory of change. This distinguishes it from an organisation taking a random punt on something utterly unknown. The evidence won’t come from its own work, which hasn’t yet yielded fruit; but it will come from analogous circumstances.

For instance, TippingPoint addresses climate change by bringing together performance artists, visual artists and climate scientists in the hope that artists will be inspired to create work in response, raise awareness of the problem and spur action. It has a great long theory of change with loads of links – and obviously it’s too long to be able to demonstrate that every time TippingPoint runs an event, carbon emissions decline.

However, it is possible to produce evidence for each link in the chain. For example, one link is that artistic activity can influence public attitudes and action. This has been powerfully demonstrated for over a century. How the Other Half Lives: Studies Among the Tenements of New York, an essay in photojournalism published in 1890, revealed New York’s slums to many influential people for the first time, and was credited with inspiring political reforms that improved the lives of millions. Similarly, the 1852 novel Uncle Tom’s Cabin by Harriet Beecher Stowe is credited with changing American attitudes towards slavery. Another link is that public awareness drives action, for which evidence might come from public campaigns to discourage drink-driving.

So, though an innovative programme can’t prove its impact, it can (and should) have evidence which supports its theory of change. They’re not taking a wild leap into the dark, but are working on a hunch, which presumably comes from something.

We shouldn’t discriminate against innovation. But we should consider which innovations are likely to work, and which aren’t.

One of many insights about giving from my book ‘the Freakonomics of charity’, here—>


Source: ‘an essay in photojournalism’: Riis J., 1890, How the Other Half Lives: Studies Among the Tenements of New York: New York: Charles Scribner’s Sons.

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What the gov’t should do about the charity tax row

Part 1: Try to regain some credibility in this debate

1. Make HMRC release the relevant donor data

Whatever the rights & wrongs in the debate, sentiment is inflamed by the fact that the charity sector can’t even size the problem because HMRC won’t release the relevant data. For a gov’t ostensibly committed to transparency and open data, this is a childish own-goal. [Technical note: the proposed cap will hit any donor whose total ‘tax avoidance bill’ comes to 25% of their income or £50k (which you’d get from a 40% tax payer giving about £80k). Since many donors might give over £80k but split between several charities, charities individually won’t know which of their donors are affected, nor how much they give in total, so can’t estimate the amount they stand to lose. HMRC uniquely has these data. Obviously it should release anonymised, aggregate data.]

Hiding data implies that there’s something to hide.

2. Persuade everybody that the gov’t does not equate giving with tax avoidance

We can’t have a sensible discussion about the rights & wrongs of capping the tax-payers’ subsidy to charities and raising tax revenue  – which is long overdue – because the government has offended donors by implying that it regards giving as tax avoidance. I don’t know how HMG can do this – I’m not a politician – but I’d suggest it involve Ministers talking about what they give, some strong visual, e.g., a press conference at the Wellcome Trust or at the Foundling Museum.

3. Name the 100 fraudulent charities, or admit that that was bullshit

In an early skirmish on this row, HMG said that it was necessary because ‘some – about 100 – charities don’t do much charitable work’. A bit odd to hit 190,000 charities in pursuit of 100, especially when there’s  a regulator in place. HMG then wouldn’t say which 100 it meant.

Either there are some charities about which the gov’t is concerned, in which case say so; or there aren’t, in which case, have the honesty to admit that you didn’t mean it. Just lying outright is hardly helpful in an adult discussion.

4. Get Vodafone to pay its tax

You can’t tax charities whilst letting Vodafone off its tax, and – according to Private Eye – the Chancellor is lobbying the Indian government so that Vodafone doesn’t have to pay tax there either.

Part 2: Try to have a sensible discussion about the role of the state vs. charities & giving

As I’ve said before, the current tax system allocates taxpayers’ money as though there were no scarcity, and on the basis of neither merit nor democracy. It’s rubbish and I don’t defend it. The gov’t’s proposed system doesn’t change the problems of merit or democracy, and doesn’t even really solve the scarcity problem.

Scarcity: the gov’t could announce the total amount of subsidy which it will give charities.

Quality:  then it announces some mechanism for ensuring that only charities of decent standard are eligible (use ideas from health).

Allocation mechanism: have a public debate about what types of charity should get included (for my money, health but not donkeys).

Part 3: Stem charities’ current losses by offering a compromise of improvement

There is MASSES of money which the government forces charities to waste – about a billion quid  from reporting on contracts to bits of the public sector. Since reducing cost has the same effect as increasing revenue, the gov’t could gain a lot of friends by making some significant effort to reduce this haemorraging, which is entirely within its own gift.

And many charitable donors are rubbish: foundations waste ~£400m of charities’ money in their absurd reporting requirements, and even more in their absurd, unilateralist application processes. Most of them provide zero transparency (spending tax-subsidised money entirely in private) and make zero effort to figure out if they’re helping or to share learnings (discussed tangentially in my book).

The government could, potentially, defuse the current row by offering the following as ‘concessions’:

– announce some major drive to chop the waste created by public sector funders

– announce that tax subsidy will only be available to foundations (i.e., permanent, non-operating donors) which are more accountable and transparent. For example, to qualify, donors must (A) have some mechanism for charities to give honest  & anonymous feedback, (B)  publish estimates of the ‘externalised costs’ of their reporting & application processes & how they’re reducing them (again, discussed in my book), (C) have some stated proportion of their meetings in public and/or a public AGM at which any member of the public can ask the directors to account for their strategy & decisions (a good idea for any charity of scale), and (D) publish annually what they’ve been doing, and useful, machine-readable data on what works & what doesn’t, a bit like Shell Foundation does.

Why the gov’t’s position makes no sense, but neither does the campaign against it–>

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Why I don’t back the Give It Back George campaign

Charities are furious about the government’s proposal to give them less money via the tax system. Well, they would be, wouldn’t they? Hence they’re campaigning frantically to block the proposal. But people interested in effectiveness and impact – and who understand that we’re allocating scarce resources – should support neither the government’s proposed changes (which makes no sense) nor the current system which the campaign seeks to preserve, for three reasons.

  1. Your salary goes to donkeys and Eton

Under the current tax regime, any charity can get tax reliefs (of which there are many, including exemption from rates and corporate tax, as well as relief on donations). The charity world is very broad, encompassing organisations which care for donkeys, dogs, cats, hedgehogs, and posh school boys, as well as unarguably noble causes such as cancer and domestic violence.

Many taxpayers would be surprised that a chunk of their salary is subsidising donkeys and hedgehogs. At a time when we are closing public libraries because the Exchequer’s run dry, that’s probably not what they’d choose if asked.

There has never been a proper public debate about which charitable causes HM Taxpayer wishes to subsidise. This row would be a good starting gun for one.

  1. Some charities are rubbish

Some charities are better than others, just as some teachers are better than others, some doctors, some athletes. Some demonstrably achieve twice as much as others for the same money, some 10 times, and occasionally, some achieve 25x as much. Put another way, some achieve only 4% of what others could achieve.

Furthermore, some charities don’t need money half as urgently as others do. The Donkey Sanctuary receives over £2000 per donkey, whereas mental health charities receives only £714 per beneficiary*. And if charitable income all dried up today, the Donkey Sanctuary’s could keep going more than two years; Oxfam would last just two months, and Christian Aid about three weeks*.

Donors should allocate their scarce resources based on the evidence about what works, yet currently, as I say, any charity can get tax relief, irrespective of its performance. Why should the taxpayer subsidise the bad as well as the good?

They shouldn’t. In medicine, public funds are only spent after drugs have been evaluated by a public body (NIHCE); in education, schools wanting public money are subject to inspections; economic and scientific research proposals get only public funding after scrutiny by an independent research council.

It seems to me not unreasonable that charities wanting tax subsidy should be asked to produce some evidence of their effectiveness, and that the finite resources should be allocated based on the convincing-ness of that evidence. [Given that the charity sector has been talking for ages about impact, it knows that some charities are better than others, so it’s odd that nobody’s made this point before.]

  1. Some non-charities are brilliant

By contrast, tax relief is generally not available to social enterprises. A cafe set up to employ young people with learning disabilities probably would be unable to register as a charity so would get nothing from HM Taxpayer, despite possibly being much more effective at helping those young people than some charities. For a government which only a fortnight ago launched a £600m fund for supporting social enterprises, this seems a curious omission.

What to do?

Clearly HM Taxpayer has very limited resources. They should be allocated on merit and democracy alone. So the public should be asked which causes are eligible for tax relief, and perhaps the government should define the total sum of tax relief available (for my money, human rights is in but donkeys are out), and then to the most demonstrably effective organisations within those causes, irrespective of whether they’re charities, social enterprises, public bodies or anything else.

[As ever, the boys at Philanthrocapitalismhave some measured analysis too. And the Institute of Development Studies thinks that ‘UK tax policies are the least of charities’ problems‘]

*Data from my book It Ain’t What You Give, It’s The Way That You Give It. The calculations are public.

How do you find out whether a charity is achieving anything?–>

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