At the end of last year, the Irish government received rather unfavourable coverage for its suggestion that it help the work of many charitable organisations by distributing the European cheese mountain to the poor. In fact, research that we publish today finds a new link between charitable giving and cheese. On average, UK households spend as much on cheese as they do giving to charity – around 0.4 per cent of their total spending.
Of course the aim of our research is a little broader than the charity-cheese comparison. We analyse more than thirty years of data on household charitable giving and look at the main trends over that period.
We find that a lower proportion of households today give to charity in a two-week period than was the case three decades ago (27 per cent compared to 32 per cent). However, the Millennium year marked a turning point in the long-term downward trend (in 1999, the proportion was down to 25 per cent). This was a year in which the government reformed Gift Aid. There were also many individual charity campaigns.
On average, households give more now in real terms than they did three decades ago – £2.34 in 2008 compared to £0.98 in 1978. This takes account of donors and non-donors. The fact that real donations have gone up in spite of falling participation is because donor households are giving a lot more (their donations have done up nearly three-fold over the period).
However, looking at the past twenty years, the rise in donations has done little more than keep pace with rising GDP. As a share of total spending, households are giving exactly the same now (0.4%) as they did ten years ago – and as they did twenty years ago. This is in spite of big changes in charity fundraising, in tax incentives and in methods of giving. The good news about the resilience in generosity is that giving appears to be fairly recession-proof, for example. But, it may be hard to achieve the kind of step-change in generosity that David Cameron sees as part of his Big Society.
Last week’s Green Paper set out the government’s strategy for encouraging people to give time and money – part of its vision of a Big Society. There were few concrete ideas – beyond the suggestion that ATMs provide prompts to donate – but instead a set of guiding principles: Great opportunities, Information, Visibility, Exchange and reciprocity and Support (GIVES). In a nutshell – people need new and exciting ways to give (such as at ATMs) and they need to know about them; their giving needs to be visible and it needs to be valued. This is a potentially exciting time for the sector – even as many are worried about the effects of government spending cutbacks – it provides fertile ground for experimentation to see what works and what does not. In designing potential pilots, there is a growing body of evidence to build on.
A number of field experiments with individual charities have found successful triggers that can encourage people to give – these include announcing lead donations, providing a match, rewarding donors with small gifts, making donations public and telling people how much others have given. The findings have led people to generalize about what motivates people to give – signals of quality for individual charities, the desire for prestige, reciprocity etc – yet single-charity studies can only tell us about what motivates people to give to specific charities. None of these studies has looked at whether the triggers simply cause people to give more to charity A at the expense of charity B. There is a real risk that all the shiny new opportunities simply cause people to change the way that they give and a need to show that new schemes increase total giving, not just shuffle it around. To achieve that, there needs to be more understanding of what the real barriers are to people giving – and what can be done to eliminate them.
One of the big ideas in behavioural economics is that defaults can have a powerful effect on people’s behavior in overcoming inertia; they have been shown to work in relation to employer pensions with auto-enrolment leading to big increases in participation. Payroll giving is an obvious extension that we hope to test. But one important lesson from past research is that the detail of the default matters – a low default, while increasing participation, could lead to some people reducing the amount that they give. There also needs to be evidence that a scheme that helps someone to help others can work as well as a scheme that helps someone to help their future selves.
The emphasis on visibility accords with the findings from research which finds positive peer effects. For example, Frey and Meier (2004) found that when students were told that a higher proportion of past students had donated to a good cause, 64 per cent compared to 46 per cent, this had a positive effect on the proportion who gave – but the increase was small at around 2 percentage points. But, as with defaults, providing so-called “social information” can have a negative effect if the amounts that others have given are low. Alpizar et al (2008) found that informing people about a low modal donation increased participation but reduced the average donation (compared to no social information). More interestingly for the ATM proposal, suggestions to give particular amounts that are imposed from above have been found to have a negative effect. Alpizar & Martinsson (2010), show that compared with a social reference that comes from peers, a suggestion from the charity reduced both the probability of giving and the conditional amount given.
Evidence from ultimatum games in the lab, and from elsewhere, suggests that individuals have a preference for fairness, and that this preference is a driving force behind their charitable donations. Based on this, and the increasing prevalence of ideas such as a “Robin Hood tax” and “UK Uncut”, suggesting a belief that corporations, and in particular banks, are bearing too little of the burden of economic hardship, would seem to suggest that the encouraging charitable giving through boxes emblazoned with the logos of banks may not have the desired effect. One response to the ATM suggestion on BBC’s Have Your Say website was that “If bank cards started nagging me to donate I think I’d give LESS not more”.
 Frey, B. & Meier, S. (2004) “Social Comparisons and Pro-social Behavior: Testing “Conditional Cooperation” in a Field Experiment” American Economic Review Vol 94 No 5 pp 1717-1722
 Alpizar, F., Carlsson, F. & Johansson-Stenman, O. (2008) “Anonymity, reciprocity, and conformity: Evidence from voluntary contributions to a national park in Costa Rica” Journal of Public Economics Vol 92 issues 5-6 pp1047-1060
 Alpizar & Martinsson (2010) “Don’t tell me what to do, tell me who to
follow! – Field experiment evidence on voluntary donations” Working Papers in Economics No. 452
 Barr & Zeitlin (2010) “Dictator Games in the lab and in nature: External validity tested and investigated in Ugandan Primary Schools” CSAE WPS/2010-11
In one sense, George Osborne said very little about the Big Society in his speech last week. He mentioned it only once, near the beginning when he announced that there would be “additional allocations to support the Big Society, establish community organisers and launch the pilots for the National Citizen Service”. Yet in his many ways, his speech spoke volumes about the Conservative’s Big Society vision.
A key part of the Big Society is involving not-for-profit organisations in the delivery of public services. This is something that the previous Labour government was also keen on. But if the Labour government had a vision, it was of a “top down” Big Society; i.e. government funding for not-for-profits providing public services through grants and contracts. This led to a big increase in the amount of income that charities received from the government, up 128% since 2000/01 and an expansion in the sector – from 120,000 charities in 1994/95 to 171,000 in 2007.
Even before the public spending cuts, some Conservatives rejected this top-down approach. Ian Duncan-Smith criticized what he called the “Big charity, Big government” duopoly. Contract funding, he argued, favoured big charities, although the evidence shows that large charities have not become any more dominant over the period since 1997. He also argued that it threatened to erode the very thing that gave not-for-profit organisations their edge – their “mission”.
And now much of this government funding is under threat. The Government has allocated £100m to a transition fund to help voluntary and community sector organisations deal with the changes as part of the CSR – but this is dwarfed by the size of the cuts – an estimated £5 billion according to the Charity Commission. New Philanthropy Capital have predicted that community development, financial exclusion, and parenting work charities will be particularly hard hit.
Instead, the coalition’s vision is for a Big Society that comes from the bottom up. To replace contract funding, Ian Duncan Smith called for more volunteers with “fire in their bellies” and more stakeholder-led funding: more genuinely voluntary activity from the voluntary sector. But can this really deliver?
It rests on the belief that “bottom up” is better than “top down” as a way of involving not-for-profit organisations and ensuring public services that meet local needs most efficiently and effectively. Individual donors and volunteers have local knowledge, they have commitment and vision and they can personally derive enormous benefits from engaging with local not-for-profit organisations. But there are also risks: that the geographic and service spread of bottom-up services may be patchy and un-coordinated, that pure voluntary funding may be unreliable compared to government money, and that it may come with ideological strings attached. These risks are particularly great at a time when demand for services is likely to increase following cuts announced in the comprehensive spending review to housing benefit, disability benefit and support for families with children.
The bottom up approach is a big leap of faith. Not least, the belief that there is a lot of untapped volunteerism. One of the few economic studies to look at volunteering by Richard Freeman found that a key factor in explaining whether or not people volunteered was whether they had been asked. Perhaps that is all that it takes. But much of the evidence suggests that “pro-social” behaviour is fairly concentrated. In particular, public sector and not-for-profit workers – who tend to do more unpaid overtime (“donated labour”) in their jobs than private sector workers – also typically volunteer more. In the British Household Panel Survey, 35 per cent of people working for not-for-profit organisations said they volunteered regularly compared to 21 per cent of public-sector workers and 12 per cent of private sector workers. So, perhaps the one great hope for the Big Society is that many of these public sector and not-for-profit workers will soon find themselves with much more time on their hands.
 “Working for nothing – the supply of volunteer labor”, Journal of Labor Economics 1997, vol 15, pp. S140-166.