Grant-making foundations 'should donate 5 per cent of endowment annually'

Economists tell conference this would increase funding for the sector by £600m a year

Michael Green
Michael Green
The government should consider introducing legislation to oblige grant-making foundations to pay out a minimum of 5 per cent of their total endowment every year, according to two economists.

Speaking at the Raising Funds from the Rich conference in London last week, economists and writers Matthew Bishop and Michael Green, who co-wrote Philanthrocapitalism: How the Rich Can Save the World and Why We Should Let Them, told delegates that such a rule could generate billions more for the sector.

Using figures from Cass Business School's Family Foundation Philanthropy 2009 report, they said they had calculated that if all of the top 100 family foundations in the UK, which currently give less than 5 per cent a year, increased their giving to this minimum threshold, it would increase funding for the sector by £600m per year.

Speaking after the conference, Green told Third Sector that because of the tax subsidies that foundations benefit from, they had a public duty to give back to today's taxpayers who are footing the bill.

"This minimum payout amount has been around in the US for 40 years and it is accepted as part of the public interest," he said.

This minimum payout would incentivise foundations to maximise their returns, he added.

David Emerson, chief executive of the Association of Charitable Foundations, said that any payout now would not increase the overall amount available to the sector, but just alter the way the money was distributed.

He said such a regulatory mechanism was not needed in the UK, unlike in the US, where there is no equivalent body to the Charity Commission.

"All foundations could make very big single payments," he said. "But what really matters is the effectiveness of their giving."

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