Charity sector in danger of ‘double whammy’

1 June 2010

Report reveals a £57 million drop in vital legacy income for the charity sector.

The UK charity sector could be facing a ‘double whammy’ to its income, reveals a report released today by the ESRC Centre for Charitable Giving and Philanthropy (CGAP) at Cass Business School, London, and charity consortium Remember A Charity, putting pressure on vital frontline services.

The report outlines a 3% drop, equivalent to £57 million, in the £1.9 billion value of legacy gifts left to charities in wills each year, which comes at a time of looming cuts to the third sector’s annual £12.8 billion statutory funding.

This financial pressure on the third sector is also occurring when charities are being asked to contribute to the new government’s ‘big society’ agenda. The vision is to increase charity and community involvement in the delivery of public services, such as welfare and health.

New research outlined in the report revealed that the 20 leading legacy-earning charities, which together attract 42% of all charitable legacies in the UK, showed a real annual fall of 3% in their legacy values in 2008-09.

The fall has come as market trends undermined the assets and property values to which legacies are linked. If extended to the entire charity sector, this relates to a collective £57 million drop in income. Cuts to the statutory funding of the charity sector have yet to be revealed, but a recent report by The Charity Finance Directors Group estimated that it would “fall dramatically”. A 1% reduction will mean an additional £128 million reduction in finances. Currently the £1.9 billion raised annually from legacy giving – the equivalent of over 25 Red Nose Day appeals – comes from only a tiny proportion of the population (7% of adults aged 40+ in the UK ). This is in contrast to the 74% of people in the UK who regularly support a charity during their lifetime .

Commenting on the findings of the report, author Professor Cathy Pharoah, Co-Director of CGAP at Cass said: “Gifts left to charity in wills are such a crucial source of funding to many charitable activities that it is vital to keep a watching brief on their value in this uncertain economic environment. Some charities depend heavily on the income they raise from legacy gifts, while others are increasingly hoping that legacies and private giving will help them weather any forthcoming public spending cuts.”

Stephen George, Chairman of Remember A Charity, added: “Legacy giving is the invisible lifeline for so many UK charities yet many people don’t realise they can make a gift in this way; they think it’s about large gifts, and is not for them. The truth is, that after looking after family and friends first, a small share of whatever is left can make a real difference to charities and the invaluable work they do.”