Does inequality exist within charities?

Charities exist to provide help and raise money for those in need. They help overcome many inequalities that exist and help elevate hardship.

A recent report from Oxfam highlighted that the gap between the global rich and poor has continued to widen. Taking data from Forbes and the annual Credit Suisse Global Wealth data-book, which gives the distribution of global wealth going back to 2000, 82% of money generated last year went to the richest 1% of the global population while the poorest half saw no increase at all.

According to Oxfam, the richest 42 people on the planet had as much wealth as the poorest half of the global population. The charity blamed corporate power, tax evasion and erosion of workers’ rights as causes of the widening gap. It should be noted that the report has been queried by a number of critics, but few would argue that there is a significant gap between the rich and the poor.

Interestingly, there is a comparison with Oxfam’s report to recent analysis carried out by Fundraising Magazine, that used data collected from the top 15 UK fundraising charities’ accounts in the haysmacintyre/Charity Finance 100 Index.

Analysis of the fundraised income of these 15 charities found the combined fundraised income has doubled over a 20-year period, adjusted for inflation, from £1bn in 1996 to nearly £2bn in 2016. Macmillan Cancer Support was the fastest growing fundraising charity. Its fundraised income grew by nearly 250 per cent to £231m. It is unsurprising that the top 15 fundraising charities comprised of 5 health charities, 4 international relief charities, 2 childrens’ charities, RSPCA, RNLI, the National Trust and the Salvation Army.

If we also consider the latest Charity Commission statistics taken from the Register dated 31 December 2017, only 2,250 charities achieved a total annual income of at least £5m. Therefore only 1.3% of all charities in England and Wales received 72.2% of all income generated. Staggeringly, 154,740 charities generated just 27.8% of total income.

In 2017, Charity Finance magazine used data on long-term investment assets from the Charity Commission’s Register to analyse the UK’s wealthiest charities. It established that sector’s total investment assets were £113.7bn, of which £50.1bn was held by the top ten charities, and £74.2bn by the top 100.

What links these reports together is the that richest charities, such as Wellcome Trust, Garfield Weston Foundation, Esmée Fairbairn Foundation, Leverhulme Trust and The Henry Smith Charity were created by a legacy of rich philanthropists. The list is not limited to Victorian or Edwardian wealth as the Children’s Investment Fund Foundation demonstrates. Looking globally, many of the largest charities and foundations have been created in recent years by living billionaires, such as Bill and Melinda Gates, who are included in the Oxfam report. 

It has to be appreciated that the wealthiest UK charities have been lucky to receive a legacy or benefit from disproportionate income as they support popular causes. But like the philanthropists before them, these charities are well governed, understand risk and maximise returns to further their missions.

Those charities that decide to support current and future beneficiaries have largely maintained and grown their assets with good management. They are careful how they grant money or engage in social investment but have undeniably distributed millions to smaller charities who have been less fortunate. 

Charities themselves can be the products of global economic inequality, so overspending may simply redress that balance. Arguably, charities sit on too much wealth and could spend more. From Warren Buffett to Lord Sainsbury, it is reassuring that many of today's philanthropists have stated that they will give much of their wealth in their lifetime. The Giving Pledge invites the wealthiest people in the world to pledge more than half of their wealth to charitable causes either during their lives or in their wills. Maybe it is time for charity trustees to consider why their charities exist and join the pledge by spending their endowment?