If 130 grantmaking trusts and foundations (GMTFs) increased their charitable expenditure to 3%, it would unlock an extra £300m for charities, according to new research.
Pro Bono Economics (PBE) examined the levels of reported charitable expenditure and net assets of around 2,000 GMTFs registered with the Charity Commission.
It found that between 2016 and 2020, around 130 organisations distributed less than 3% of their net assets on average.
PBE said that “if just these organisations raised their charitable expenditure levels to 3% of their net assets, it would generate an extra £300m for good causes each year”.
It noted that “on a purely financial level, trusts and foundations are significant”, having distributed an estimated £4bn in grants to charities in 2019-20, compared with £1.3bn from the private sector. The largest 300 foundations alone hold £87.3bn in assets.
Although “the majority of these trusts and foundations take the responsibility of distributing funds to good causes incredibly seriously”, others could be doing more to put their money to good use.
PBE said most of the additional money would come from family foundations, which “were twice as likely than corporate foundations to have never spent over 5% of their assets over the five-year period”.
Lack of accountability
PBE said family foundations might want to spend a smaller proportion of their assets because of “a lack of professional support” and “splits between siblings”, among other things, but that “at the root of low spending rates by any foundation is a lack of accountability”.
“In the first instance, these organisations are hard to find – they’re the hidden dragons of the charity sector. There is currently no means by which to simply isolate them in Charity Commission data and those with the least activity have the lowest reporting requirements.
“Even if they are found, the Charity Commission has few powers and even fewer resources to do anything about them. Unlike the US and Canada, the UK doesn’t require any minimum level of expenditure by its foundations. The programmes which do exist to encourage foundations to do more only focus on inactive or almost-inactive organisations.”
Charity sector jobs growth outpaces private sector
Meanwhile, PBE has also said that the latest Office for National Statistics (ONS) labour market overview shows “a continued weakening of the labour market generally”, but that there is cause for optimism for charities.
The ONS has published experimental statistics which show that the labour market continued to loosen, with employment falling and unemployment and inactivity rising between June and August 2023.
Beth Kitson, research and policy analyst at PBE, said the figures reveal “a continued weakening of the labour market generally, with yet another fall in the number of vacancies and a further increase in unemployment”.
However, she added “there is cause for some optimism in the charity sector, which benefited from stronger levels of recruitment than the private sector over the last quarter”.
“New Bank of England data shows employment growth among charities exceeded 5% between July and September, while businesses grew their workforce by just under 3%”.
Kitson said that charities have had to expand their workforce to meet an ever-increasing need as the cost-of-living crisis continues to bite.
“This has led to a two percentage point increase in pay growth – from 4% to just over 6% – among charities since the second quarter of 2022, according to the Bank of England.
“With levels of economic inactivity due to long-term sickness still a major concern, the resilience of the charity sector, which specialises in supporting those with long-term health problems to return to work, is vital. The chancellor would be well-served in finding a place for the sector in any solutions proposed to tackle this challenge in next month’s autumn statement.”
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