Anthony Hilton: Time for the charity sector to win back some trust

The Wellcome Trust which announced its results today is one of the biggest charities in Europe and as such provides more funds for medical research than any other single organisation.

It has been able to do this year in and year out because of the performance of its investments which, over the past two decades, has been a stunning 407%. The return in the year to September was 16.9%, equating to £3.5 billion on an investment portfolio valued at £20.9 billion, of which £1.1 billion was donated to charity.

Returns have been 138% over 10 years largely thanks to the courage of Danny Truell — its long-time fund manager who sadly had to step aside to an advisory role this year for health reasons — whose policy was to buy when everyone else was selling in the turmoil after the collapse of Lehman Brothers in 2008. It allowed him to put together a portfolio of the world’s best companies at prices which come around just once in a generation and the charity has reaped the benefits since.

But the Wellcome prosperity is in stark contrast with the experiences elsewhere in the sector at this particularly important time of year.

A survey published yesterday under the sponsorship of the Cambridge and Counties Bank — an interesting organisation jointly owned by the local government pension fund and Trinity Hall, one of the university’s colleges — highlighted how financial pressures are making people re-think the amount they will give, and in a quarter of cases, cut back.

The reasons are obvious enough — people’s incomes are falling, or at least failing to keep up with the rise in the cost of living. When average real incomes are at the levels they were 15 years ago the effect is bound to show.

Charities are also suffering from poor investment income. The kind of payouts enjoyed by Wellcome are very much the exception: most of the smaller organisations lack the resources or the inclination to employ high-quality investment advisers and instead leave their money in one of the many charity deposit accounts, where they get the worst possible returns.

There are a handful of these accounts which pay 1% a year interest but there are very many more which pay 0.1% — and about one in seven pays even less than that. There was a time when investment income made a big difference to the charitable sector. For most, those times have long gone.

There is, however, another problem which too many charities refuse to acknowledge but which is fundamental — they are also suffering from a collapse of trust.

Surveys show public distrust focuses on executives who appear to be more interested in their own career than the aims of the charity; charities not knowing or not being open about where the money goes; media publicity about the collapse of high-profile organisations such as Kids Company a couple of years back; high-pressure fundraising which seems to exploit the elderly and other vulnerable groups with deals — for example for energy — which are not as good as they seem, and the perception that too much is spent on advertising and wages and not enough on the people or things the charity is meant to help.