Five ways funders can support charities and social enterprises through the cost of living crisis

The rise in living costs is already affecting organisations that rely on public donations. How can corporates, foundations and individual donors step in to support social sector leaders struggling to balance their budget and keep up with growing demand? Expert advice from the UK's Charities Aid Foundation.

Mark Greer CAFThe cost of living crisis is really starting to bite. With food, energy and fuel bills rapidly rising, we know more people are likely to rely on the services of charities – following already heightened demand during the Covid-19 pandemic

Yet, charities and social businesses are having to do more with fewer financial resources. The findings of our UK Giving report 2022 – the largest study of household giving behaviour in the UK – already showed that fewer people are giving to charity overall. This trend is exacerbated by rising living costs: many people say they plan to rein in their budgets further, including one in eight cutting back on charity donations.

With rising costs for their own energy and fuel bills, a fall in household donations only adds to financial concerns for many social businesses and charities.

Many people plan to rein in their budgets further, including one in eight cutting back on charity donations

Individuals who are not in need of government financial assistance have already been advised to donate their £400 energy discount to charity – and claim Gift Aid and tax relief in turn.

But what more can corporate and high-net-worth donors do to support social sector organisations in this turbulent time?

 

1. Reassess your chosen causes and organisations

It may be time to reassess your giving strategy to ensure your funds are going where they’re needed most. Think about how you could have the biggest impact within the parameters of your corporate purpose or personal giving goals.

Be careful not to be led by personal biases; instead, objectively assess which issues may be overlooked or underfunded. Could you support causes such as homelessness, food poverty, mental health and debt support, which may be particularly stretched at this time?

Make sure you truly understand the drivers and social barriers behind issues to help identify the most effective route to tackle them, and identify organisations that are evidence-led in their work so you know it’s making a difference.

 

2. Offer more flexible funding

Your partner charities will always appreciate unrestricted funding. It gives them the freedom and flexibility to allocate the funds where they’re most needed, which may be those all-important core costs to ensure their organisational survival. Could you prioritise unrestricted donations or loosen some of your usual requirements for grants?

Consider too topping up previous donations to account for inflation or providing more flexibility with existing grants or loans.

Consider topping up previous donations to account for inflation or providing more flexibility with existing grants or loans

Private and corporate donors could consider supporting social enterprises and charities with a loan to a social investment fund, which will give you a social, as well as a financial, return. Social investment loans and blended finance packages (a mix of grant and loan money) are a source of affordable, flexible finance; this can help organisations continue their charitable activities, stabilise and plan for future growth.

 

3. Encourage employee engagement with good causes

Corporate donors should consider how best to engage their employees with charitable giving. Be sure to actively listen to your staff to understand their motivations for giving. By working alongside charity or social enterprise partners, you can create experiences for your staff to better understand the challenges faced by disadvantaged communities and the benefits of charitable giving. 

Involving them in the reassessment of your giving strategy or selection of partners can foster a connection with the cause area and better engagement with fundraising campaigns. Matching funds can multiply the effect without relying too heavily on individual contributions.

You can also match individual donations through a payroll giving scheme such as Give As You Earn, which encourages regular donations from staff that is both tax-efficient for them and provides charities with a regular income.

 

4. Respond strategically to humanitarian crises

When it comes to humanitarian emergencies, we know that people give generously. Our findings showed that people donated larger-than-usual sums to the Ukraine crisis. While this is encouraging, larger donors should consider incorporating longer-term emergency response into their giving strategies to achieve a greater impact.

Donors can disengage after the immediate relief, even before a needs-based assessment has been conducted and a long-term recovery plan has been developed. You can go beyond providing only a short-term impact by assisting with mitigation, response and recovery.

Larger donors should consider incorporating emergency response into their giving strategies

Crises sometimes lead to limited funds being redistributed away from existing partnerships or planned donations. To prevent this, consider creating a separate pot in your portfolio or budget for humanitarian emergencies.

 

5. Individual donors: don’t forget Gift Aid

When UK taxpayers donate to a charity or community amateur sports club, the organisation can claim Gift Aid tax relief, which effectively increases the value of donations by an extra 25% (at no extra cost to the donor). Higher rate taxpayers can also benefit from personal tax relief when they give to charity. In some positive news, our research shows the use of Gift Aid has remained higher than pre-pandemic levels, with 55% of individuals donating in the past year reporting they had claimed.

However, every year more than £500m of Gift Aid tax relief is left unclaimed, meaning it doesn’t end up with the charities delivering frontline services. Always ensure your donations include Gift Aid, which is invaluable for charities, particularly for larger donations.

 

While the sector faces ever-greater difficulties, we know that charities and social enterprises can be resilient with the right support. For funders, now is the time to ensure these organisations are supported effectively, so that ultimately donations go further for the people and communities they serve.

  • Mark Greer is the managing director of philanthropy services at Charities Aid Foundation

 

Illustration by drynvalo on Freepik

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