News in focus: Gift Aid soars but income plummets

Charities Aid Foundation's annual report has some good news, and some bad news, writes John Plummer.

For some years, charities have been kicked and cajoled into taking Gift Aid more seriously. If the Charity Trends 2005 survey is correct, it appears they are finally listening.

The survey, which is conducted annually by the Charities Aid Foundation, is widely regarded as the most authoritative study of trends in voluntary income.

This year's study, which is set to be published tomorrow, analyses data belonging to the 500 largest fundraising charities from 2003/04. The findings will reveal that tax-efficient giving increased by 12 per cent over the period, and is now worth £2.7bn to the voluntary sector.

"Charities are now much more organised about Gift Aid and have better systems in place," says CAF research director Cathy Pharoah.

She also credits initiatives that promote tax-efficient giving, such as the now-defunct Giving Campaign, for the trend.

Thirty per cent of donations are made tax-efficiently, a rise of 135 per cent in the past decade. Pharoah estimates that another 30 per cent is easily convertible, but the remaining 40 per cent, which mainly comes from cash pledges such as tin collections and purchases in charity shops, is much trickier to convert.

"The sector faces the challenge of whether to invest in new types of fundraising or accept that it will miss out on a potential further £800m in tax relief a year," she says. "One approach would be for fundraisers to give the acquisition of regular commitments priority over one-off donations, ensuring increased tax-efficient income and reducing the multiple direct mail appeals that swamp the public."

Silver lining

The rise in Gift Aid is the highlight of what is an otherwise depressing state-of-the-sector report. Of most concern is the continued downward trend in voluntary income, which over the year grew by only 2.9 per cent.

Over the past decade, it has grown by barely 5 per cent in real terms.

One of the main causes of the decline is charities' failure to attract legacies, whose value to the sector slumped by 2 per cent amid fears that people are instead choosing to spend their money on the likes of private healthcare, education fees and pensions.

"The promotion of charitable legacies should take a higher priority in future fundraising strategy," says Pharoah. "There might not be enough major gift fundraisers, and not enough charities employing them."

Within charity sub-sectors, religious, arts and education charities have experienced the most spectacular growth in voluntary income. The 6.2 per cent rise in faith-based giving reflects what is happening in the US, where grant-making bodies are lavishly rewarding religious groups.

International causes remain the most popular, although their decrease in income of almost 7 per cent represents the sector's greatest decline.

As the survey covers the pre-tsunami period, the trend will almost certainly be reversed next year.

"Although many are hoping that the tsunami response will herald a new era in international giving and awareness, the results support the idea that fundraising for international causes is volatile and strongly influenced by world events," says Pharoah.

Cancer charities increased their income by 19 per cent to £580m, to narrow the gap on international causes, which yielded £625m. More specifically, Cancer Research UK strengthened its grip as the UK's most successful fundraising charity by growing its voluntary income from £243m to £306m. Its nearest rival, the National Trust, saw its income plummet from £160m to £144m.

The result is that Cancer Research UK now generates more than twice as much voluntary income as any other rival. It also receives more money from charity shops than anyone else, taking £60.5m at the tills. Oxfam, the British Heart Foundation and Help the Aged follow in the list.

In events income, Christian Aid tops the chart. The £26m it generated accounts for 60 per cent of its voluntary income. But across the sector as a whole, income from fundraising events suffered a worrying fall from £384m to £351m.

Statistics on which organisations received the most National Lottery money make interesting reading, with the English National Opera and the Royal Opera House Covent Garden first and second in the list with £32m and £22m respectively. Two more opera charities feature in the top 10, along with the the Royal National Theatre and the Royal Albert Hall.

In terms of who gives most, pharmaceuticals giant GlaxoSmithKline is far and away the biggest corporate donor, giving seven times more than its nearest rival. The Royal Bank of Scotland ousted petrochemical company BP as number two.

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