While the global economic crisis may have cut philanthropic donations, the level of giving remains impressive, and recent UK government actions to sharpen incentives for donors will improve the process in the UK, figures in the industry argue.

In the annual budget statement in March this year, UK finance minister George Osborne unveiled measures designed to improve giving, including a cut in inheritance tax to 36 per cent for people bequeathing 10 per cent or more of their estate to charity. And a recently released government white paper policy document proposes a suite of measures, such as payroll giving, to encourage philanthropy.

The document is part of measures the coalition government is pushing under its “Big Society” idea of reinvigorating civil society through volunteering and more use of non-state institutions.

Fending off a perhaps natural scepticism about government promises, Berkeley Law, the specialist private client law firm which handles affairs of the ultra wealthy, has welcomed the white paper.

Tim Thornton-Jones, director and founding partner at Berkeley Law, praised the paper’s idea of promoting volunteering, rather than just financial donation. “The whole idea is about the time and effort involved rather than just the money behind it [charity],” Thornton-Jones, who has spent more than 20 years specialising in philanthropy, told WealthBriefing recently.  

“It is very much a move in the right direction and there is a lot of cynicism about among the public,” he said.  

Over at the specialist advisory organisation, New Philanthropy Capital, the firm broadly welcomed the white paper but argued that not enough had been done to encourage more input from wealthy individuals and advisors.

“I was disappointed that some key issues were either missing or brushed over very quickly,” said Plum Lomax, who runs NPC’s training advisors, in a blog entry about the white paper.

“There was little in the paper on encouraging more giving amongst the wealthy. This is important if we are to see a sea-change in charitable giving here. Instead the focus was on rounding up pennies and tiny donations at cash-points. What were missing was ideas like introducing a ‘giving pledge’ in the UK akin to Bill Gates and Warren Buffett’s initiative across the pond,” she said, referring to efforts in the US.

She continued: “There wasn’t enough about encouraging the provision of philanthropy advice by private client advisors (bankers and lawyers) to their wealthy clients.” (To view her blog, click here).

The comments come shortly after a survey of ultra high net worth clients by JP Morgan Private Bank showed that sharper tax incentives and more information on the effectiveness of charities will encourage more giving. Some 30 per cent of respondents to the survey cited better tax incentives as a reason to give more, with 17 per cent saying that they would do so if they had more time to focus on giving. Additionally, some 14 per cent said that they would give more if they had more knowledge on the charity’s impact and 14 per cent said they would give more if they found a common interest to enable them to give together as a family. JP Morgan Private Bank drew responses from 78 of its UHNW clients, who together represent more than £6 billion (around $9.7 billion) in wealth.

Last November, Barclays Wealth published a study that confirmed that philanthropy should also be at the front of wealth managers' minds if they wish to keep pace with current trends. It surveyed 2,000 high net worth individuals around the world and found that close to a quarter (23 per cent) regarded charity as a “top spending priority.”

Coutts, the private bank, recently found that the number of donations of £1 million (around $1.63 million) or more is the highest since before the early phase of the credit crisis. The value of donations over £1 million is showing signs of recovery; in 2008/9 the value was £1.548 billion, which is up £143 million from £1.405 billion in 2007/8, although lower than levels in 2006/07. The number of donations from individuals remains more or less consistent – with 100 donations compared to 96 in 2007/8; and 102 in 2006/7.

The Sunday Times (of London) Rich List 2011 of the UK's wealthiest individuals and families, produced a few weeks ago, said that charity donations from the 100 top philanthropists fell 33 per cent in the latest 12 months to £818 million, reflecting the 37 per cent fall in wealth for the richest 1,000 persons. Proportions of wealth given away to charity, as a share of a person's total assets, are rising, the survey said. The highest proportion, as ranked by the Rich List's "Giving Index", was for Anurag Dikshit, the Indian businessman and philanthropist, with a recent donation of £172.4 million. Donations in the Rich List fall some way short, however, of the multi-billion sums associated with the likes of Bill Gates, the software tycoon.

Giving trends

Berkeley Law’s Thornton-Jones said London continues to see brisk philanthropic activity as the city is a key base for charities, both foreign and domestic.

A challenge, “as always”, he said, is the bureaucracy involved. “It takes two to three months for the application to the Charity Commission to be processed. Then you have to apply to get tax-exempt status from the HMRC, which can take up to six to eight weeks more,” he said. (The CC is the organisation that regulates charities in England and Wales).

“The main problem is the time and expense involved in setting up new charities. By the time someone has decided they are going to set up a charity, they have pretty well got their ideas of what they are going to do in order. However, the registration process with the Charity Commission is very thorough and makes settlors really address the underlying issues,” he said.

Thornton-Jones said philanthropy clients at Berkeley Law come from regions such as Europe, Russia and the Far East. Work is usually referred by word of mouth or as part of a broader conversation about private client services offered by Berkeley Law. If a client only uses the firm for charity advisory work, then the client is charged a specific fee, or the client will pay a charge for a broader range of services, of which philanthropy is one element.

Environmental charities are a popular trend, as are medical charities, he said, adding that another busy area was advising clients on merging charities to achieve more economies of scale and cut administrative costs.  

“I see this as a theme going forward and it is being encouraged by the Charity Commission," he added.