Archive for November, 2011

Is branding good for charities?

November 22, 2011 1 comment

Michael Sanders

This Saturday’s Financial Times[1] ran a column under the headline “Charity begins with a brand” (although I note that the online edition of the newspaper contains the more equivocal “can”). Title notwithstanding, the tone of the article is encouraging to the branding of charities, specifically when it comes to applying for companies’ CSR budgets, although the phenomenon is hardly limited in this way, with branding increasingly a common part of charities’ functions.

This may, as the column suggests, be the result of the rise of entrepreneurial individuals within charities (or at the helm of smaller operations) – as the author, Mike Southon, writes “Twenty years ago, the main ambition of university students was to secure a lucrative job in a merchant bank, Today, the social conscience of young people seems much better defined”. Although a straw poll of my students suggests that the desire to work for a merchant bank remains alive and well, there is no doubt that many charities are trying to learn from the tools used by private sector companies to sell their wares. Is this an unambiguously good thing, however?

There is no doubt that advertising and branding are powerful tools, but it isn’t clear with whom charities are competing. Research by the CMPO[2] and Cass Business School finds that giving as a portion of spending has been fairly constant since at least the late 1970s, despite a number of policies designed to increase it, and that charities are increasingly dependent on a shrinking pool of donors.

If the rise of ‘professionalism’ within fundraising, as well as a number of government policies to increase giving, have had little effect on overall giving levels, perhaps charities are not competing with private firms for donations but with each-other (we cannot observe the counterfactual world without these changes, and so cannot say for certain that giving would not have been far lower than it is without them, however). If this is true, branding may be good for some charities but bad for others. With the money spent on branding, it essentially boils down to a negative sum game.

It is possible however that the charitable giving sector is a natural monopoly and that charities enjoy considerable economies of scale, as we might easily imagine for the distribution of mosquito nets – if this is the case then the game need not be negative sum as well branded charities will increase in size and benefit from reduced costs, making the entire sector more efficient. It is also possible that professional branding and advertising make workers in an organisation more productive, and that output will rise sufficiently to compensate, even if significant redistributions of donations between charities do not occur.

It is equally plausible, however, that charities have committed themselves to a race to the top in their branding, spending ever more money to compete over a pot whose size does not change.

Neither of these are impossible, and there is not currently enough evidence to support either conclusion – until there is, the effect of branding and entrepreneurship on the fundraising side of charitable giving will remain ambiguous.

[2] Smith, Pharoah, Cowley and McKenzie (2011) “The state of donation: New evidence on charitable giving in the UK”

Unemployment and the Euro-zone Crisis

November 18, 2011 4 comments

Paul Gregg

Chris Grayling, the Employment minister, firmly laid the blame for the rapid rise in unemployment in yesterday’s figures on the Euro-zone crisis. This argument is so obviously bogus, it is disappointing for a minister to be using this as a line of defence. However, the labour market figures are not as bleak as the headlines suggest. The effects of the Euro-zone crisis will hit us over the next six months, not the last, and the minister should have kept his powder dry as he’ll need this excuse in the coming months.

The argument presented is; the Labour Force Survey (LFS), which is the main data source on the labour market, showed a growth in employment until June, after which it appeared to go off a cliff with employment falling 190,000 in the three months leading up to September. The problems with this argument are threefold. First, the Euro-zone crisis broke in July and the performance of the UK economy since then has been the best in a year; a point made by the latest retail sales figures which show very healthy growth in September and October. So far rather than the Euro-zone crisis damaging growth we have been doing rather well. The danger lies in the future not the recent past. Second, employment and unemployment figures are driven by decisions made by firms, and it takes about three to four months for this to be seen in the data. For example, the latest data from September 2011 reflects the state of the economy in May-June rather than prior to the crisis. Finally, the LFS is only one of four data sources about the health of the labour market. Over the big sweep of boom and bust events, these track each other well, but on the specifics of timing there can be wobbles in any one of the series; looking at the set offers a better picture. In addition, the LFS have a survey of employment from employers, a survey of current vacancies and the count of all those claiming unemployment benefits. The last two offer the most up to date picture, but the LFS and employer survey are more comprehensive. All three indicators, other than the LFS, suggest that employment started to fall and unemployment started to rise in February or March this year. The claimant count bottomed out at 1.45 million in February and has risen every month since at a steady rate of 20,000 a month or so.  Vacancies currently offered by employers almost reached 500,000 in January before slipping back to 460,000 since May; a level consistent with low levels of net job losses. The employer’s survey only runs to June at the moment but says that employment peaked at 26.7 million in March and fell by 100,000 by June.

The LFS clearly looks like it mistimed the move back to job shedding by three months; this happens quite often but rarely matters much. The broader data clearly shows two things. First, that the labour market downturn precedes the Euro-crisis by some months and is totally in line with the downturn in UK economic growth, which started in November last year.  Second, that the employment shedding and unemployment rise has been pretty constant since March, rather than a recent collapse. Both of these stories are clearly at odds with the Euro story. But the rub is that the evidence suggests the latest sharp rise in unemployment in the LFS is a catch up from previously understating the rise. The labour market hasn’t, yet, gone off a cliff. Indeed the healthy growth and small rise in the claimant count may say things were improving a little as the Euro-crisis broke. So the overwhelming picture is that the current sharp rise in unemployment isn’t driven by the Euro-crisis but is also not as sharp as it first appears. The Euro-crisis excuse may well be needed, and be genuine, from March next year when the picture around January starts to emerge. But for the latest figures it is entirely bogus and also misses the deeper picture.

“Sleepwalking towards Johannesburg”? Ethnic segregation in London’s secondary schools

November 15, 2011 1 comment

Richard Harris

Recently the vice-chair of the Headmasters’ and Headmistresses’ Conference caught the media’s eye. He expressed concern about racial segregation in London schools, saying, “it can’t be a good thing for London to be sleepwalking towards Johannesburg.”

Those are headline-grabbing words but are they true? Do black or Asian pupils fill classrooms almost exclusively in some parts of the capital? The short answer is yes, they do. But, like most short answers, it is an over-simplification.

A new working paper published by CMPO today offers a new methodology for comparing differences in the ethnic compositions of locally competing secondary schools. It finds schools in London that in the academic year 2008-9 had a majority of their intake comprised by pupils of Black African heritage, some that were majority Black Caribbean, and others that were almost wholly Bangladeshi, or Indian.

Those concentrations reflect the residential geographies of where particular ethno-cultural groups live in London, with the geographies being shaped by historical and on-going processes of labour shortages, immigration, natural growth and suburbanisation (Finney & Simpson 2009: a highly recommended read). However, the differences between schools cannot solely be attributed to residential choices and subsequent constraints on which secondary schools the pupils attend because the paper uses an index of difference to compare schools that are recruiting pupils from one or more of the same primary schools. In this way it finds a secondary school that has thirty percentage points more Black African pupils than its average, locally competing school, a school that has thirty percentage points more Black Caribbean pupils, one that has forty points more Bangladeshi pupils, and another with sixty points more Indians.

So, there are differences between schools locally and some of those differences are quite stark. Nevertheless, we need to be wary of assuming the most extreme cases are representative of the norm. More commonly the differences do not veer too greatly from what would occur if all pupils simply attended the nearest secondary school to their primary. There is also little, if any, evidence to suggest the local differences between schools are growing, at least not when demographic changes are taken into consideration.

Of course, the debatable words are “too greatly”. For anyone who would aspire for schools either to represent the ethnic mix of their surrounding neighbourhoods or, even better, to ameliorate residential differences by being better mixed than neighbourhoods, any increase in the concentration of particular ethnic groups in particular schools will be a disappointment – a sentiment that is laudable. However, there are social justice arguments in favour of school choice and in not simply reproducing patterns of, for example, neighbourhood disadvantage by directing which school a pupil must necessarily attend. Choice, precisely because it is choice, can produce outcomes that some do not approve of but that are attractive, for whatever reasons, to those who make the choices. To deny them that choice, either directly or indirectly by overt criticism of their choices, raises issue of power as well as equality of opportunity.

There are three further reasons why the suggestion of ethnic segregation can be misleading. First, school allocations are not necessarily a matter of choice but of the overall matching of supply and demand for school places. Second, sorting by ethnicity may be confounded with sorting by income. In 2008, the Spearmen’s rank correlation between the proportion of pupils in a London secondary school of any of the Black African, Black Caribbean, Bangladeshi, Indian and Pakistani groups, with the proportion eligible for free school meals was rS = 0.568 (p < 0.001). Third, research by the Runnymeade Trust has shown overall preferences among minority ethnic parents for their children to attend ethnically mixed schools (Weekes-Bernard 2007).

In summary, and taking the evidence in the round, whilst it is undoubtedly true to say that some but a few secondary schools in London contain a high proportion of a single ethnic group, the dynamic implied by the phrase “sleepwalking” is, as other studies have also discovered, unhelpful (Johnston et al. 2007).

Finney, N. & Simpson, L., 2009. “Sleepwalking to segregation”? Challenging myths about race and migration, Bristol: The Policy Press.

Johnston, R. et al., 2007. “Sleep-walking towards segregation?” The changing ethnic composition of English schools, 1997-2003: an entry cohort analysis. Transactions of the Institute of British Geographers, 33(1), pp.73-90.

Weekes-Bernard, D., 2007. School Choice and Ethnic Segregation, London: The Runnymeade Trust.

The NHS and reform

November 3, 2011 1 comment

Carol Propper

The House of Lords is currently grappling with the proposed Coalition reforms to the NHS. But even as their Lordships debate, the new NHS Commissioning Board, which is at the heart of the government’s reforms in England, is due to start work. The Board will have a major role. It will take on the day-to-day running of the NHS, with a staff of around 3,500 and have overall responsibility for NHS care worth £80bn. It will also oversee the new clinical commissioning groups led by GPs and other clinicians who will “buy” care within the NHS, and organising the treatment of complicated conditions such as heart transplants.

The NHS is very good at delivering care within budget but it struggles to enact innovation and its productivity record is poor.  At the heart of the reform programme proposed by the Coalition is the belief that plurality in provision in the NHS will foster innovation and productivity. While the medical unions, broadly defined, have run an active campaign against plurality equating it with privatisation and an increase in inequalities,  plurality on the provider side is a model used by many health care systems, including France, Germany and the Netherlands, as the best way they know of for delivering health care. In addition, we know from studies of the rest of the economy that much innovation comes from new entry and the exit of poorly performing incumbents.

The actions of the clinical commissioning groups are central to whether change in the patterns of care provision in the NHS change or whether the current incumbents, dominated by the large acute hospitals, retain their grip on provision. And the actions of the Commsisioning Board are critical to whether this will happen or not. The Board could either encourage commissioners to break out of the traditional mould and encourage plurality and diversity or it could stifle it by being overbearing and over-prescriptive.

At present, Sir David Nicholson, chief executive of the Board, seems very mildly interested in plurality. He has said that the Board will publish information about general practice, so that people can compare what their GP provides compared with others in the area and nationally and he has said that “We think this will be a very powerful mechanism for patients to make choices about which GPs they use.” But big deal: such choice and information has supposed to be available to health care users for at least the last 5 years. There is a danger that Nicholson and his colleagues think this is radical. If so, then any hope for plurality is dead, as the real issues that will have to be tackled – such as stopping supporting poor providers and actively allowing people to move away from them, are far larger than simply posting more data on the opening hours of GP surgeries.

Should Payroll Giving be abolished?

November 1, 2011 2 comments

Michael Sanders

John Rentoul, chief political commentator at the Independent and biographer of Tony Blair, has achieved a cult following for his list, published online of “Questions to which the answer is no”, currently standing at number 730 at time of writing. Despite some postulating to the contrary in recent weeks, the title of this blog is a good contender for slot number 731.

A report[1], by Adrian Sargeant and Jen Shang of the Bristol Business School at the University of the West of England, has strongly suggested, however, that the scheme may not be “fit for purpose”, and that it may warrant scrapping, to be replaced by widespread solicitation of donations via direct debit in the workplace.

It is true that payroll giving is not without its flaws; Potter and Scales (2008)[2] identify in their review of payroll giving a considerable number of areas for improvement, including the need to simplify the system of enrollment, better market the offering, and to speed up the process so that charities receive money given more quickly.

While nobody disputes that payroll giving could be improved, it is foolish to argue that it is without important merits, such as employer matches and tax effectiveness. Moreover, although payroll giving is unpopular among fundraisers[3], it is popular both with government (who ultimately will decide whether the system is to be scrapped) and with donors. If the retail idiom that “the customer is always right” holds for charity, this should by itself be enough to justify its continuation.

These advantages to payroll giving pale in comparison, however, to the strength of the assumptions made by the report’s authors.

The authors argue that while employer matches and some level of tax efficiency will be lost by moving from Payroll to Direct Debit giving, this will be compensated for by removing the need to contract with a Payroll Giving Agency, and, seemingly, through increased revenue per head (people tend to give more through direct debit than through payroll).

For this to be true, current direct debit givers would need to be identical to current payroll givers in every dimension except their means of giving. The evidence does not seem to bear this out, with a recent report by the Charities Aid Foundation[4], finding that payroll givers are on average young and more likely to be male than the general population of givers. Since these groups tend to give less to charity generally, it seems that selection, not the mechanism of giving, is driving the smaller donations.

If we don’t believe that donations will suddenly rise on conversion to a direct debit system, can we at least assume that donations per head will remain the same? Probably not. Donations through Payroll Giving are cheaper than through direct debit because of their tax effectiveness; for each unit of “good” done by the charity, the donor must forego less other their own consumption. This move would amount to a rise in the price of giving for an important element of society, and under reasonable assumptions could lead to a fall in donation amounts.

Nor is it clear that the number of donors would remain constant. Potter and Scales (2008) identify “widespread opinion that employer-matching schemes were very valuable in encouraging employees to sign up, and provided a real incentive” (p 53), suggesting that at least some donors are induced to donate by the match – if the match varies with their donation (as is common), this amounts to a further reduction of the “price” per unit of good done by the donor, and removing it would further discourage donation.

Some money would undoubtedly by recouped from the portability of direct debits, which is estimated (Jenkins (2007)[5]), cost charities around £7million a year; whether the full amount of this would be recouped is uncertain, as some employees leaving a firm for unemployment or retirement may wish to curb their spending and hence cancel their direct debits, despite incurring a guilt cost.

How sensitive might giving be to some of these factors? Without rigorous analysis, it is impossible to say with much confidence, but for illustration, we can look at two model cases of payroll giving compared with the average. Mean donation size through payroll giving is around £10, with only 6% of those eligible taking part. Royal Mail and British Telecom, both of whom offer an employer match, raise £2.5million apiece, Royal Mail[6] through high levels of enrollment (25%), and BT through large donations (around £20 a month[7]), and both attribute their success in large part to the match. Both firms give around 4 times the average for a firm of their size, and between them contribute 5% of all payroll giving donations – were enrollment to fall to average levels, this would make a marked difference.

Comparing the two worlds as best we can, we see that £4.4million (Guardian, 2011), of revenue could be saved through reduced administrative cost, and £7million through portability in the best case scenario, for a saving of £11.4million. Leaving aside possible changes to amounts donated and to individuals’ likelihood of donating, Potter and Scales (2008) estimate that employer matches amount to 10% of payroll giving. Since payroll giving is valued at £114million in 2011[8], the cost of scrapping it to charities would be £11.4million – exactly what it would save under the best case.  In short, the case for scrapping payroll giving just doesn’t add up.