The Charities Aid Foundation proposed, in the wake of yesterday’s Budget, that the suggested Gift Aid reform could raise more than £700m for the sector. They’ve produced some detailed calculations to support this thesis.
But I’m not sure they’re right.
Before I explain why I think CAF might be barking up the wrong tree, let’s look at how CAF itself arrived at its figure.
It starts with a figure for 2008/09 from the NCVO Civil Society Almanac, when total voluntary giving was £13.1bn.
We then, it says, have to eliminate what was given tax efficiently – cash given under Gift Aid, cash given in legacies, and other tax-efficient forms of giving. This strips out £7.4bn. So we’re left with £5.7bn which could be Gift Aided, but isn’t.
Then we look at limiting factors.
A quarter of gifts are given, CAF says, by non-taxpayers. But some donations aren’t Gift Aided because the donors aren’t aware of the relief. (Only 82 per cent, its research says, are aware of Gift Aid). Some isn’t Gift Aided because the channel doesn’t allow it. (Only 56 per cent of gifts go through channels which allow Gift Aid, more research says.)
When we take all this into account, CAF says £1.96bn is “in the game” – Gift Aid we might be able to claim, but for some reason, can’t.
If we assume that this new consultation will increase by 15 per cent the number of channels where we can claim Gift Aid, and the number of people aware of it, that would mean just over £2.6bn was “in the game”.
CAF’s research then assumes that we could somehow get all of this “in the game” funding to suddenly be Gift Aided.
We then look at how much we could raise on £2.6bn of donations that aren’t currently Gift Aided, and now would be. This, it says, would raise £735m for charity in tax relief (including, I believe, a bit that isn’t actually Gift Aid, but income tax relief for higher-rate taxpayers)
OK. That’s its calculations. Let’s look at the issues with them.
First, they take a starting figure of £13.1bn, which appears to come from the Almanac. But that figure includes all sorts of gifts which weren’t Gift Aid-able in the first place: grants of up to £5bn, for example. So it isn’t really the right starting point.
The NCVO itself has a figure for individual donations in the back of the Almanac, which is £5.8bn for this year. This is a better starting point, but before we can use it as the basis for further calculations, we need to be aware of some things.
First, we should be aware that the NCVO figure is for gross donations – it’s already taken Gift Aid into account. It also doesn’t include a load of stuff that should be in the calculation, because it’s only a figure for voluntary sector income. Lots of Gift Aided donations go to organisations outside the voluntary sector – independent schools, faith organisations, arts organisations, sports clubs.
The NCVO suggests these various bodies have an income of around a quarter the size of the sector itself. If we assume that they get the same proportion of their income from donations then that suggests that Gift Aid-able donations were worth £6bn-ish in 2008/09. I can’t be much more accurate than that, because there aren’t exact figures anywhere I can find.
HMRC figures suggest £4bn of Gift Aid-able income was already Gift Aided.
This leaves £2bn of donations on which Gift Aid is not claimed – only 35 per cent of CAF’s figure.
I’m not saying I’m exactly right with this figure. I’ve had to lick a finger and stick in the air several times to get to this number. But I reckon I’m closer than CAF.
However, all this calculation yields is a new “in the game” figure. It doesn’t address whether CAF is right in its estimates of how much of that “in the game” money we can grab.
CAF thinks, remember, that roughly 34 per cent of un-Gifted Aided money ought to be Gift Aidable.
First, CAF says that somehow, the changes of the next year will increase the amount of money up for grabs – i.e. given in a Gift Aidable way – to around 45 per cent.
And, it says, even though we aren’t grabbing any of that money right now, we’ll somehow manage to grab all of it once these changes to Gift Aid are brought in.
Neither of these assertions are based on any evidence. They’re just guesses. The first guess doesn’t look totally unreasonable, though in my view it’s a bit optimistic. The second one is wildly unrealistic.
In short, these assumptions are a back-of-the-envelope job. They assume we could increase the amount of Gift Aid claimed by about 70 per cent, when 10 per cent would be an absolutely amazing achievement. They are not numbers the sector should take seriously.