Charitable giving for overseas development – UK trends

Tony Atkinson, Peter Backus, John Micklewright, Cathy Pharoah, Sylke Schnepf 17 January 2009

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There is a thriving debate on the effectiveness of development aid and on improving the ways in which the money is spent, e.g. Paul Collier’s The Bottom Billion and Roger Riddell’s Does Foreign Aid Really Work? At the same time, even with greater efficiency, more resources are still needed if the Millennium Development Goals are to be achieved.

The UK government’s record in providing funds through Official Development Assistance (ODA) is well known. ODA stagnated in real terms during the 1980s and 1990s, falling as a percentage of national income. This pattern was reversed from 1999, reflecting the Labour Party’s commitment to achieving the UN target for ODA equal to 0.7% of GNI by 2013.

This is the government’s record, but what has been done by individual UK citizens? We have been trying to answer this question, documenting what has happened to charitable donations for overseas development since the late 1970s.

Donations, legacies, and other “voluntary income” received by UK development charities totalled about £1 billion in 2004-5 – well below the £4 billion of ODA. (Our analysis focuses on development charities in the top 200 fundraising charities.) But the trends over time have been startlingly different. In real terms, charitable donations for development in the UK increased seven-fold from 1978 to 2004. Not only is this in marked contrast to the change in ODA, but it represents a much larger rise than that in total household income.

A number of questions arise. When did the increase take place? Was it largely a response to events such as Band Aid or has there been a steady upward trend? Which charities have grown fastest? Have new charities displaced the old? How does the increase in giving for development compare with giving for other causes such as cancer relief or animal welfare? And what, if any, is its relation with official development assistance?
The basic story of the trends in total donations is shown in Figure 1. (The figures do not include legacies or other “voluntary income” of charities.) Growth in donations was far from steady over time. We have identified four distinct periods: 1978-83 (before the “surge”), 1983-85 (the “surge” associated with African famines), 1985-97 (“marking time”), and 1997-2004 (“renewed growth”). Over the period as a whole, donations in real terms grew at a rate of 7.5% per annum. Encouragingly, in view of the current economic recession, the previous fall in household income in the early 1990s appears not to have been associated with a sharp decline in donations.

Figure 1. UK charitable donations for overseas development and total household income, 1978-2004 (constant 2007 prices)

In terms of individual charities, the overseas sector is highly concentrated, with half of total donations accruing to the four largest charities (Oxfam, Christian Aid, Save the Children, and the Red Cross). An important feature has been the arrival of new charities during the period, but there is no strong evidence that they have grown faster. The new charities may have helped raise awareness and lever new funds into the sector, but they do not appear to have been the main long-term beneficiaries of the change in public sentiment. Barring the 1983-85 “surge” when the Band Aid Trust burst onto the scene, about 90% of donations have gone to charities already in existence in 1978.

Giving for development has grown faster than giving for all other causes taken together – by more than 1.5% in real terms per annum. In part this reflects the “surge” in 1983-5 but growth has been faster in all sub-periods apart from 1986-1996. Only medical research and animal welfare have grown faster overall (leaving aside legacies), and, despite popular impressions, giving to the latter cause is much smaller in scale.

If stagnating government ODA in the 1980s and 1990s was accompanied by rising private generosity, does this mean that any increase in ODA to achieve the target of 0.7% of GNI will lead people to be less generous? In considering this important question, we have to take account of the fact that ODA includes grants made by the government to UK development charities to spend on their overseas activities. These grants actually increased from around £25 million (in 2007 prices) in the early 1980s to a figure 10 times that amount in 1994, though since levelled off up to the last year for which we have data, 2004. These grants now represent a significant amount in relation to the sector’s total voluntary income. Any firmer conclusion awaits the results of econometric analysis of the data but, on the face of it, the simultaneous rise in government grants and donations does not support the hypothesis that grants crowd-out private donations.

Note: The work reported in this article was funded by the UK Economic and Social Research Council’s Non-Governmental Public Action Programme.

References

Atkinson, A B, P G Backus, J Micklewright, C Pharoah and S V Schnepf (2008) ‘Charitable Giving for Overseas Development: UK Trends over a Quarter Century’, CEPR Discussion Paper 7087.
Atkinson, A B (ed.) (2004) New Sources of Development Finance. Oxford: Oxford University Press.
Collier, P (2007) The Bottom Billion. Oxford: Oxford University Press
Riddell, R (2007) Does Foreign Aid Really Work? Oxford: Oxford

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Topics:  Development

Tags:  charity, foreign aid, donations

Centennial Professor at the London School of Economics and Fellow of Nuffield College, Oxford

Researcher in the ESRC Third Sector Research Centre, University of Southampton

Professor of Social Statistics and Policy Analysis, University of Southampton and CEPR Research Fellow

Professor of Charity Funding at the Sir John Cass Business School, City University, London

Lecturer in the School of Social Sciences and in Southampton Statistical Sciences Research Institute, University of Southampton

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