Strategic Giving:  The Art and Science of Philanthropy

by Peter Frumkin

The University of Chicago Press
458pp

Since Strategic Giving is directed at both the researcher and the practitioner in the United States, it might be thought not to have any particular interest or usefulness in Britain.   This is not so.   It demonstrates the enormous differences in culture, structure and attitude between the two countries and, if studied by HM Treasury, would help to inform those who wish to encourage a more active culture of giving in this country.   Frumkin’s book is not a critique of contemporary philanthropy nor an instruction manual for donors, but he does make an extremely strong case for so-called ‘planned giving’.

A whole new generation of wealthy donors in America (and in this country) are seeking to leave their mark on the public sphere, and what Frumkin strives to explain is that these donors could benefit enormously from having a comprehensive plan to their giving.   This is a much more difficult thing to organise than appears on the surface and he suggests a model of philanthropic strategy by identifying five essential rules that donors should consider when developing a philanthropic strategy:-

1.  Donors must declare for themselves the value to be produced through their       giving.
2.  Donors must define the type and scope of programme to be supported.
3.  Donors have to select a vehicle or structure through which they will conduct       their giving.
4. Donors must find a giving style and profile level that is satisfying and        productive.
5.  Donors have to settle on a time frame that will guide their giving.

‘Strategic giving’, Frumkin argues, can be defined as the clear alignment of these five important philanthropic dimensions and he urges that only when answers to all five questions are in alignment will the opportunities for social impact and donor satisfaction be high.   Moving towards alignment is the central task of the strategic donor.

Frumkin further argues that in the United States the underlying trend towards professional management of philanthropy has significant weaknesses.   First, questions about effectiveness have been weakly transformed into conversations about the performance of grantee organisations instead of being focussed on the more central issue of achievement of the donor’s philanthropic mission.   Also, demands for greater accountability have led professional grantmakers only to increase the flow of public information about foundations, and not to redress the fundamental power imbalance between institutional donors and recipient organisations that makes real accountability difficult.   Finally, Frumkin states that nagging concerns about the fundamental legitimacy of private action on behalf of the public have never been fully resolved.

The usefulness of Frumkin’s Strategic Giving forces one to look at the philanthropic scene in Britain, which certainly demands a similar study.   A recent conference organised by the Institute for Philanthropy revealed some useful information on the subject.   Hilary Browne-Wilkinson, the Institute’s Director, outlined the way in which, in spite of strong traditions of Victorian philanthropy, this was replaced after the second world war by the welfare state.   The problem has been that, since 1979, voters have refused to countenance higher taxation.   As she said, ‘With diminished government funding, we must turn to other means of supporting public purposes — philanthropy being one;  another being the revenue creation of charity itself’.   She pointed out that, in attempting to rebuild a culture of philanthropy, Britain has wisely looked to America, where they have never had the same level of government support for social causes.   She provided some helpful statistics.   Apparently, the percentage of individual charitable giving to GDP is more than double in the United States than in the UK.   In 2002, $183.7 billion was given, which represented 1.75% of GDP.   Using the same measure for the same year, UK individual giving was £7.3 billion or 0.76% of GDP.

So, why do Americans give more ?  America is not a nation of hit-and-run millionaires, but a country where people make money and realise that they have a responsibility to give money away in order to keep the system going.   Giving money away helps Americans to feel part of the community and this is reflected in the causes they give to.   Religion (including local charities) gets 45% of donations, while university and alumni giving gets only 1.4%.   In Britain, on the other hand, 13% goes to religion, 17% to medical research, 14.4% to children and 9.5% to animals.   Few UK donations are devoted to the community.

There is an enormous difference in how Americans and British give.   77% of all collection methods in the UK (measured in the UK Voluntary Sector Almanac) are spontaneous, loose change methods.   In the United States, ‘planned giving’ is how they give.   61% of the voluntary income of non-profit organisations comes through planned giving.

A key issue is tax incentives.   According to the Chronicle of Philanthropy, 54% of the richest US donors said that they do give for tax benefit.   In Britain, although there have been changes to the tax regime, including reforms to Gift Aid and payroll giving, there is a very significant difference in that the charity receives most of the refund under Gift Aid, not the individual.   This is one difference that HM Treasury should look at closely, because many people do not feel that gift aid gives them a tax break.

The second area that the Treasury needs to consider is the fact that gifts of capital and assets in Britain do not have an allowance similar to that on gifts of shares.   The recent review by Sir Nicholas Goodison, ‘Securing the Best for our Museums:  Private Giving and Government Support’, published by HM Treasury in January 2004, recommended a tax allowance to encourage getting more art into museums.   But nothing was done to implement this recommendation once Paul Boateng, who had promoted it, left office.   When similar proposals were made to HM Treasury by the Art Fund before the last budget, it was said that they were supported by Treasury officials, but then torpedoed by the Chancellor on the grounds that it was wrong to give tax benefits to the rich.   But, without obvious and understandable tax benefits, the rich are unlikely to put as much back into the community as they do in the United States.   The answer is relatively straightforward:  you have to provide incentives to giving.

The main outstanding tax arrangement which would bring Britain into line with the United States would be to allow donors to retain an interest or derive a benefit from gifts and still get a tax deduction.

‘Planned giving’ is vital to the economy of the United States and to the sense of responsibility individuals have for the welfare of their local community.   It could be just as vital in Britain, but the government and the Treasury must learn how to encourage a culture of philanthropic giving and must recognise that public interest lies in promoting self interest.   The welfare state is increasingly bankrupt.   So, the government must somehow encourage individuals in the private sector to share the responsibility for running the state.