Other Family Office Philanthropy

Family Foundations Tackle Rising Need

Family foundations are diverting resources to help tackle increasing societal need, caused by spending cuts and the effects of the recession.

Family foundations, the leading source of major philanthropy in the UK, are diverting resources to help tackle increasing societal need, caused by spending cuts and the deepening recession, but say they are also feeling the effects of the difficult economy and say their contributions will come down in the years ahead.

The findings come in the fifth edition of the influential annual series ‘Family Foundation Giving Trends’; which also finds foundations strongly value their independence and remain unconvinced by policies that aspire towards significant changes in the way they distribute their wealth, meaning government may need to rethink how best to work with donors for the public good.

The report is produced by Pears Foundation and the ESRC Centre for Charitable Giving and Philanthropy at Cass Business School. This year’s study is the largest yet – along with the league table of giving by the UK’s 100 largest family foundations, it has added a detailed survey of 40 of these donors, to explore their funding decision-making and outlook for the future.

The combined evidence in the report reveals the vital contribution family foundations make, but also reflects a worrying pessimism about their ability to meet growing demand for their help:

  • The largest 100 UK family foundations donated £1.33 billion to charitable causes in 2010/11 and a total of £6.9 billion over the past five years, representing 8% of all private giving.
  • While there was an overall fall of 1.8% in giving in 2010/11, there was a 6.2% rise if the results of the largest foundation, the giant Wellcome Trust, are excluded. This rise is partly the result of a small number of major one-off donations and a mixed picture amongst other foundations – 47 saw a fall in their giving and 53 saw a rise.
  • Falling assets in the past year and other economic conditions have led the majority of family foundations to believe they will collectively reduce their charitable spending over the next few years.
  • Foundations said the biggest influence on recent spending decisions has been the reduction in public sector welfare expenditure and is also the area where they expect to see the biggest increase in demand for funding

Asset values of the top 100 family foundations have reduced by 3.5% in 2010/11. Looking at trends in five years of this study, it is typical for giving levels to respond directly to asset levels in the following year. However, they do not feel they can adequately meet this need.

This year the report also, for the first time, looked at the causes supported by the top 100 UK
family foundations:

  • The top cause supported is ‘health and bio-medical causes and research (health)’ (£740 million), followed by ‘education’ (£146 million), ‘arts and culture’ (£133 million) and ‘social welfare’ (£108 million). The picture is skewed by the giant Wellcome Trust – without it, investment in ‘health’ would stand at £143 million. (It is likely that other foundations feel the health cause is well-covered by Wellcome).
  • The next biggest area supported is ‘religion and faith promotion’ (£57 million), reflecting the background of many of the foundations, and coming above ‘training and skills development’ (£47 million) and ‘environment and conservation’ (£45 million).
  • ‘Social welfare’ attracts support from the largest number of donors: 74 of the top 100 support it, however with smaller grants than for health, education or arts and culture. This reflects a focus on niche, small-scale and local projects.

The report finds foundations have a strong desire to maintain their independence – preferring to
partner with other foundations than the public sector.  When asked about the idea of a UK mandatory payout, as in the US where foundations are required to pay out a minimum percentage of their assets each year, the majority of those surveyed (65%) do not feel this will be beneficial to funding levels in the UK.

The report was written by Cathy Pharoah, Professor of Charity Funding and Co-director of the ESRC Centre for Charitable Giving and Philanthropy, Cass Business School; with Charles Keidan, Director of Pears Foundation, a family foundation based in London.

Cathy Pharoah said the report reflects an urgent need for the government to rethink its approach to encouraging or influencing giving, whether through existing or new foundations. She said: “As social expectations of philanthropy grow, and government increasingly aims to encourage giving, it is vital to inform future policy through evidence on what philanthropy does, and what encourages a willingness to give. Our report shows that independence is very important to family foundation donors, and most see their role as complementary to public sector activities, rather than as directly sharing them.”

“Philanthropic resources are small in relation to public sector spending. Government needs to understand family foundation donors better, and recognise that their independence of vision and action inspires significant added value to social well-being and donor engagement. There is a
need to keep options for further policy development to stimulate giving in an ongoing environment of economic constraint under debate.”

Charles Keidan said: “Five years of conducting research for these reports has shown that family foundations have outperformed other private giving in difficult times, and play a crucial role in addressing social issues However, there is little evidence that philanthropy can step in and fill the gap in the long term. Government and politicians may be unaware how closely linked major philanthropy is to the economic climate.”

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