A happiness index? It's not going up for charities yet

John Hildebrand, of Rensburg Sheppards, looks as what the government's proposed happiness index means for the voluntary sector

John Hildebrand
John Hildebrand

The government has put forward proposals for it to measure prosperity using a happiness index.

Proposing this a month after your austerity cuts have led the Office for Budget Responsibility to forecast half a million job losses over the next five years raises interesting questions. Are government ministers made happy by something differerent from the rest of us? Are governments overly optimistic or are they just keen on confusing the electorate with another index? Would a rising or falling happiness index be good for charitable donations? And would supporting charities lead to an improvement or a fall in the index?

Other countries, such as Bhutan, already measure happiness. And both France and Canada are said to be considering setting up their own happiness initiatives, so this sort of an index might be timely. But what makes one country happy will be different from that which pleases another, and unhappy countries might be unhappy in their own ways.

If the government is primarily concerned about getting re-elected, it should want happiness to be higher in May 2015 than it is now. The best way of achieving this is to improve general happiness, but it can be helpful to start off from a low base. So next year could be the ideal year in which to launch the index.

What would we find if we started such an index now? In some respects, Lord Young was correct when he said that times were good for many. Low mortgage rates mean that those in work have more disposable income than before. For most, however, fears about job cuts and changes to the benefits system, as well as a general nervousness about the economy, will make them feel less well off. It's likely the economy will grow in 2011/12 and GNP will be higher. Interest rates are also expected to stay low for the foreseeable future. So disposable income should continue to rise - but many will still feel worse off.

Recessions usually hit donations and thus affect charities. In 2008/09, donations fell by £1.3bn to £9.9bn.

Income from other sources is also likely to be under pressure, although income from investments should rise, with dividends from UK companies currently forecast to increase by 7 per cent in 2011.

Cheap space and spare labour should also help to keep costs down for charities, but they are likely to have to spend more as public sector cutbacks force them to fill the gaps left by government. Against this backdrop, one suspects that if there is to be an index for charities, 2011 will not be a happy year for charities in general.

- John Hildebrand is an investment manager at Rensburg Sheppards

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