Excess household savings could give £1.2bn boost to charity

Household giving could provide charities with a £1.2bn income boost as the sector seeks to recover from the financial impact of the Covid-19 pandemic, new research has found.  

A report from the charity think tank Pro Bono Economics has identified a potential “windfall” for the sector, as constraints on spending opportunities have resulted in an accumulation of about £180bn of savings above the usual rate since the start of the pandemic.

The Bank of England has projected the figure could reach £250bn, with evidence on giving behaviour suggesting that UK charities could receive an associated funding boost of between £500m and £1.2bn as a result of the spike, PBE estimates. 

However, its report says this would form only between 0.2 per cent and 0.5 per cent of the £200bn-250bn in excess savings households have accrued over the period, and would not be enough to plug the £10bn funding gap that emerged at the height of the pandemic last year.

Andy Haldane, chief economist of the Bank of England and co-founder of PBE, said the UK needs to adopt new social norms about giving in an effort to channel savings towards the charity sector.

Speaking at a conference hosted by the charity Pilotlight yesterday, he said one option would be introducing a temporary extension of the incentives to give charitably, such as the Millennium Gift Aid policy, which provided tax relief to charities helping developing countries between 1998 and 2000.  

Alternatively, the government could drive a publicly-funded donation match programme, Haldane suggested. 

“If you take our estimate of a giving boost from those ‘windfall savings’ of £0.5bn-£1.2bn and imagine that this is leveraged by matched funding from government, you’re talking real money. The result could be a rise in charitable income of closer to £5bn,” he said. 

Haldane also proposed a public campaign using behavioural economics, with a particular focus on “nudging” older and richer households to donate. 

“The Covid-19 crisis has generated a significant pool of extra savings among a number of households, especially older and richer households, due to restrictions on spending,” he said. 

“With a significant financing gap for charities to bridge, this begs the obvious question of whether more could be done to mobilise that pot of savings for charitable good.”