Written evidence submitted by John Micklewright
1. The work reported in this evidence was
funded by the UK Economic and Social Research Council (ESRC) grant
RES-155-25-0061 "Giving to Development" (under
the Non-Governmental Public Action Programme). The work has been
carried out by A B Atkinson (Nuffield College, Oxford), P G Backus
(University of Southampton), J Micklewright (University of Southampton),
C Pharoah (Cass Business School, London), and S V Schnepf (University
of Southampton).
2. The evidence relates to how (i) amounts
given by the public to UK charities working for international
development and relief changed during the last recession in the
early 1990s; and (ii) how this giving for development has varied
between persons with different levels of income in recent years.
3. The evidence draws on two sources of
information: (i) data on donations received by development charities
among the top 200 fundraising charities that have been complied
since the late 1970s by the Charities Aid Foundation (CAF) in
the annual publication Charity Trends (and its forerunners);
(ii) the Omnibus Survey run each month by the Office for National
Statistics (ONS).
4. Donations, legacies and other "voluntary
income" received by UK development charities among the top
200 fundraising charities totalled about £1 billion
in 2004-5. This represents about a quarter of the figure for the
UK Government's Official Development Assistance (ODA) in the same
year (which does not include the charities' voluntary incomes).
5. In real terms, charitable donations for
development in the UK increased seven-fold over 1978-2004 (in
marked contrast to ODA which stagnated in the 1980s and 1990s).
Figure 1 graphs donations for development (solid line) and
total household income (dashed line). (The donation figures do
not include legacies or other "voluntary income" of
charities.) Both donations and income are in 2007 prices,
ie the increases are in real terms and the effect of inflation
has been stripped out. Growth in donations was far from steady
over time. We have identified four distinct periods: 1978-83 (before
the "surge"), 1983-85 (the "surge" associated
with African famines and the work inter alia of the Band Aid trust),
1985-97 ("marking time"), and 1997-2004 ("renewed
growth"). Over the period as a whole, donations in real terms
grew at a rate of 7½% per annum.
6. The last recession occurred in the early
1990s. Figure 1 shows the impact on total household income.
Income fell in real terms by 9% between tax years 1990-1 and
1993-4. If income goes down, one would expect charitable giving
to fall too. However the graph shows little evidence of giving
to development charities to have fallen during the 1990s recession,
taking the period of the recession as a whole. Total donations
to development charities that were among the top 200 fundraising
charities actually rose over the three years, by 6%, although
the graph shows that the rise was not continuous (there was a
fall in 1993-94).
7. The number of charities included in this
calculation changes across the three years. An alternative calculation
is to focus on the donations received by exactly the same
development charities across the period—those that were
among the top 200 fundraisers in 1990-91. (We exclude Comic
Relief from this calculation.) Total donations to these 21 charities
also rose by 6% over 1990-91 to 1993-94. This figure includes
large year to year changes eg donations fell by 10% in 1993-94.
The experience of development charities was not unique in the
early 1990s recession. Donations to charities serving other causes
among the top 200 fundraisers rose by 4% across the three
years concerned. (This figure refers to 123 charities present
in the top 200 throughout the period.)
8. Three "health warnings" apply.
First, the figures refer to large charities only (which receive
the bulk of donations made for development). Second, the changes
in donations in the early 1990s will have reflected the impact
of other factors as well as the changes in household incomes.
Third, the experience of the 1990s downturn is not necessarily
a good guide to what is happening to charitable donations for
development today. The present recession is different in a number
of respects (including its causes, the severity of its onset,
and expectations about its duration).
9. The second form of evidence comes from
data drawn from the monthly ONS Omnibus survey for 2004-06. This
period covers six different months (fairly evenly spaced) in which
CAF and the National Council for Voluntary Organisations (NCVO)
sponsored the inclusion of a module of questions on charitable
giving. The questions distinguished the causes to which donations
were made, allowing donations to development charities to be separately
identified. The data cover donations made in the four weeks before
the month in which the survey was conducted. The survey also collects
information on individuals' incomes. We pool the data for the
six survey rounds in which the CAF/NCVO module was included. About
one in 10 persons report giving to development charities
in the four weeks prior to their interview.
10. The data show how differences in the
amounts that individuals give to development charities are associated
with differences in their incomes. Figure 2 plots the average
amounts given by individuals grouped by bands of gross personal
income. Both the donations and incomes are averaged across all
people in the income band, including those who do not give anything.
(In this way the average amounts reflect both the decision to
give at all and the amount given if a donation is made.) Both
the amounts given and the levels of income are in monthly figures.
The solid filled symbols show donations to non-development charities
("domestic donations") while the hollow unfilled symbols
show donations to development charities ("overseas donations").
The data are plotted on log scales. Separate graphs are given
for single and married people in view of issues relating to measurement
of donations and incomes for the latter.
11. The lines drawn on the diagrams show
the case where the donations represent one% of monthly income.
Along these lines, the share of income given to charity is constant,
and rises at the same rate as income, eg a 10% rise in income
is associated with a 10% rise in donations. The same is true of
any other line that could be drawn that is parallel to the one%
share line: along such a line donations represent a constant share
of income and rise at the same rate as income.
12. Broadly speaking, the graph for single
persons show that donations to development charities rise or fall
at the same rate as does income. A fall of income of 10% is associated
with 10% lower donations. For married persons, giving for development
rises or falls at a slower rate than income. A fall of income
of 10% is associated with a reduction in donations of less than
10%. (The same patterns apply to giving to non-development causes.)
13. Again, "health warnings" need
to be made. First, differences in income between individuals are
associated with differences in other characteristics, such as
education and occupation. It may be that it is the differences
in these other characteristics that drive the differences in giving,
rather than the difference in income. Further investigation provided
some suggestion of this—implying that a given change in
income (eg a 10% fall) of itself has less effect than is suggested
by the graphs. Second, unlike Figure 1, the graphs do not give
direct evidence on the issue of how changes in income over time
are associated with changes in charitable giving.
14. Having made the health warnings, the
main messages of the evidence presented in this note are: (i)
charitable donations to development charities make an important
financial contribution to the UK's development effort; (ii) the
recession of the early 1990s did not see large falls in charitable
giving for international development (taking the period as a whole);
(iii) differences in incomes between individuals are not associated
with disproportionate differences in their donations to international
development charities.
15. The evidence in this note draws on work
reported in papers describing the data and calculations in detail:
A B Atkinson, P G Backus, J Micklewright, C Pharoah, and S V Schnepf
(2008) "Charitable Giving for Overseas Development: UK Trends
over a Quarter Century" http://eprints.soton.ac.uk/63906/
and J Micklewright and S V Schnepf (2007) "Who Gives for
Overseas Development?" http://eprints.soton.ac.uk/48329/.
(The data have been used with the permission of the CAF, NCVO
and Waterlow Ltd.)
Figure 1. UK charitable donations for
overseas development and total household income: 1978-2004 (constant
2007 prices)
Source: donations data from CAF/NCVO
Charity Trends.
Note: the graph shows donations to charities
working for international development and emergency relief that
are among the top 200 fundraising charities in each year.
Donations do not include legacies.
Figure 2. Mean amounts given to charity
per head and levels of gross income, persons in the ONS Omnibus
Survey 2004-06 (£s per month)
A. Single Persons
B. Married Persons
Source: adults interviewed in the ONS
Omnibus survey 2006-08 during the months when the CAF/NCVO
module on charitable giving was included. ("Single"
includes co-habiting.).
Note: the data show average donations and average
gross personal incomes for individuals in different income bands,
averaged over all persons in each band (both donors and non-donors).
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