Is 'Philanthropy' still in the Dictionary?

This article by Andrew Bibby, in a slightly different form, was first published in The Observer, 1999

Is philanthropy still in the English vocabulary? The word smacks of Victorian values, of frock-coated capitalists endowing an orphans' school or a municipal art-gallery, of religious entrepreneurs using their wealth to engage in the social issues of their time. Where is philanthropy today, in a secular society where the weekly ritual of the church collecting box is passing into history?

The initial evidence looks depressing. The National Council for Voluntary Organisations monitors charitable giving each year, and the trend over the past five years has been downhill all the way. According to the NCVO, total charitable donations in 1997, at about £4,500m, were down in real terms by 31% on the 1993 figure. More than one in three people gave nothing away during the month in 1997 when NCVO was tracking people's expenditure; by contrast only 19% were non-givers during a similar period in 1994.

The voluntary sector worries about its lost income, but worries even more that the culture of giving may be being lost. What nobody seems to knows is the reason behind this: compassion fatigue, the arrival of the lottery, a growing distrust of an increasingly professionalised charity world, or simply the fruits of Thatcherism?

Certainly a society based on individual greed may not be the most fertile ground to find what Peter West of Trusts in Partnership calls 'social entrepreneurs'. "Young wealth is not picking up its responsibilities as predecessors have done," he argues. "At the end of this century, there is nothing to match the Victorian entrepreneurs like Cadbury, Rowntree and Peabody. But the wealth is still there."

His own organisation, itself a charity, is involved in plans to set up later this year a new body London Partnership, aiming at persuading successful younger City types to take charitable giving more seriously. "We're targetting the under 35s, people who've bought the Porsche, got the kids into nice schools, bought the second home and are saying 'what else do we do with our lives?'," he says.

But whilst London Partnership tries to reach the affluent young, arguably the next generation up is already taking seriously the question of how best to give away money. The word philanthropy may not cross their lips, but the baby boomers are now the section of society most likely to give to charity. "This group has got to the stage where children are flying the nest, and where some people are beginning to inherit substantial amounts of wealth," says Kate Kirkland, director of the charity unit at London accountants BDO Stoy Hayward.

Burrow below the headline statistics on charitable giving, and it becomes clear that there has been no decline in what NCVO calls 'planned giving' - in other words, using the various tax-efficient methods available to support good causes in an organised way. What's more, knowledge of the options appears to be growing. Charities Aid Foundation, for example, has recently seen a large increase in the number of individuals signing up for its innovative Charitycard and charity 'cheque account' schemes. 75,000 people now run these accounts, up 10,000 over the past twelve month. According to CAF, the age of its account holders is also dropping, from a previous profile which was firmly 50+.

"What CAF is good at is providing a way of giving small amounts of money effectively," says Kate Kirkland. The idea is that each individual runs their own charitable account via CAF which they prime with single Gift Aid or covenanted payments. Tax relief is added to the total in the account, which can then be used as and when appropriate to make smaller donations to individual charities.

The ultimate way of formalising your charitable giving in a tax-efficient way, however, is to create your own personal charitable trust. The idea is certainly not new (trusts founded by Elizabethan merchants are still giving out money today), but according to charity specialist Peter Scott of law firm Cripps Harries Hall it is one which, if anything, is growing in popularity. "They are being set up generally by individuals who have already got some established pattern of giving," he says, though he adds that his firm has also recently helped a new lottery jackpot winner create their own trust.

This is, some cynics say, one way of trying to immortalise your name: charitable trusts, once established, can continue in perpetuity. But individuals who have taken this route talk more of the satisfaction which comes from a direct involvement in the process of giving. "Whilst it's your own money to give as you think fit, it's not money which you can use for yourself," says Joel Joffe, who started his own trust when he arrived as a relatively impoverished political exile from South Africa before he went on to a successful business career. "People may baulk at giving away money which is in their own bank account, but if it's already put in a trust it's there to be given away."

Assets which are passed into a charitable trust benefit from Gift Aid relief, and are also exempt from any capital gains or inheritance tax liabilities. Joel Joffe points out that, whilst many people transfer in one-off capital sums, one painless way for entrepreneurs to build up a charitable trust is simply to donate a percentage of their company's share equity.

Peter Scott of Cripps Harries Hall adds that family charitable trusts can be used as a way of educating a younger generation in sensible attitudes to money management, investment and, yes, philanthropy. "It's a means of passing on the values, the things you regard as important to the next generation," he explains. "One imaginative family has allocated 15% of the trust's income every year for the children - these are young adults who are in their twenties - to decide how to distribute," he says.

Traditionally, personal charitable trusts were seen as the preserve of the seriously rich. Peter Scott argues that £100,000 might be the appropriate minimum amount, although as he points out recent reforms by the Charity Commission (which include the production of model trust deeds and a starter pack for new charities) make the process of setting up a charitable trust now very straightforward. Joel Joffe suggests a lower threshold: "I think some people might plan to build up a capital amount of £50,000, perhaps through contributions of £5,000 a year," he says.

There is an alternative to a fully fledged personal trust, and that is to run a trust fund through the auspices of CAF. CAF currently has about 1,200 trust clients, who use a service which is half way between CAF's Charitycard scheme and an independent charitable trust.

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