The opening plenary of the UK’s Association of Charitable Foundations’ 2011 conference on 18 October was called ‘view from the bridge’. And the view was very much what we might have expected to see: what Minister for Civil Society Nick Hurd, speaking at the end of the day, called a ‘challenging environment’. So what does this challenging environment consist of?
According to Karl Wilding of NCVO (National Council for Voluntary Organisations), addressing over 300 delegates, we are looking at a ‘perfect storm’ of very rapidly imposed public spending cuts. This is likely to mean 30,000 fewer paid staff in a voluntary sector facing an increased demand for services. David Cutler of the Baring Foundation also spoke of the charity sector as shrinking rapidly and painfully and people losing the services they provide. Good organizations will sink as well as bad ones; leaner and meaner will not necessary be the result, and the weakest in society will suffer the most.
One way to help address this situation is for the very wealthy to give more. The soon-to-be-published UK Giving 2011 research produced by NCVO and Charities Aid Foundation (CAF) shows that on average those earning under £32,000 give over 1 per cent of their income to charity while those on over £52,000 give just 0.8 per cent. Speaking at a reception at the House of Lords on 2 November, CAF Chief Executive John Low called for the wealthiest members of society to pledge to give at least 1.5 per cent of their income to charity – hardly the 50 per cent demanded by Bill Gates’ and Warren Buffett’s Giving Pledge, but a start.
And what can foundations do? According to Wilding, they need to make a transition from funding to finance; from a gut instinct approach to a data-driven approach to social change; from central to local solutions; from a focus on the organization as the arena for social change to a focus on networks. Foundations should align all resources to mission, said Cutler, endowment and convening power as well as grantmaking.
A well-attended breakout session on impact investment showed that foundations are increasingly interested in making their money work harder. Perhaps one third of the 90 people there said they had made a social investment, though only a few from their endowment.
Daniela Barone Soares of venture philanthropy organization Impetus Trust emphasized the need to help charities become more flexible in response to changes and develop longer-term approaches to their own survival. She stressed the value of co-funding with other foundations and being willing to fund existing work rather than insisting on funding new work. Impetus always gives charities unrestricted funding. This is the only sector where funders think they know better than managers, she pointed out.
Karl Wilding’s call for foundations to move from funding to finance was echoed by Tim Brodhead, president and CEO of the Canadian J W McConnell Family Foundation, speaking at the afternoon plenary. In so doing, he suggested, they should ‘invest’ in capacity building, building leadership skills, and the sector’s sustainability and viability – also setting aside at least 10 per cent of resources for ‘R&D’, innovation, investment in ‘alternative thinking’ and ‘vitalization’ of work.
Canada, like the UK, is suffering from a severe public deficit reduction programme. This is having a big and negative impact on civil society organizations, which again means foundations facing ‘limitless’ demands for rescue and substitution funding. Where the UK differs from Canada is that it seems the Canadian government had not anticipated the damaging effect of cuts on the civil society sector ‘because of its lack of knowledge/understanding of the role of the sector’.
The UK government cannot be similarly charged with lack of knowledge of the sector. Minister Nick Hurd had a number of suggestions for UK foundations. Charitable trusts could collaborate to create widely accepted and cost-effective impact measures. They could use ‘the large amounts of money [they] sit on’ to develop the social investment market from its current embryonic state. They could also match the newly launched £80 million Community First fund aimed at helping neighbourhoods take control of their local issues.
His reference to ‘the large amounts of money they sit on’ and the Community First funds illustrates the downside of the UK government’s interest in foundations: their wish to see foundations helping to fill the gaps left by public spending cuts. As Lucy Bernholz points out in her excellent Latest from Alliance post on 26 October, ‘As a society, we should not encourage the replacement of public responsibilities by private philanthropy.’ The key issue of our day, she says, is ‘what is the public responsibility’?
This is an issue we should not lose sight of as public spending cuts continue to bite and foundations and philanthropists are increasingly called on to do their bit.
Caroline Hartnell is editor of Alliance